China’s economy at risk as Xi plays the isolation game
In late 1978, China’s paramount leader Deng Xiaoping set in motion two major policy shifts that would change China and the world order in the decades to come. At a Communist Party meeting in December of that year, the leadership declared that China would turn its focus from political struggle to economic development. Within days, China and the United States announced that they would establish diplomatic relations.
These two events marked the end of China as a hermit country where one billion people lived in extreme poverty, and the start of its evolution into a superpower.
Chinese President Xi Jinping with Russian President Vladimir Putin in Moscow last week.Credit:AP
It was no coincidence that the country’s economic reform and opening up to the outside world went hand in hand. “China cannot develop in isolation from the world,” Deng declared.
Now both policies are in jeopardy. China’s current paramount leader, Xi Jinping, who has just started his third term as the nation’s president, has reversed many of the policies that propelled China’s economic rise. During his visit to Moscow this week, Xi also aligned his country closer to Russia while alienating countries that helped China develop over the past four decades.
The prospect of international isolation unnerves many people in China. They worry that China has landed itself in the “wrong” camp, just as it did after the Communist Party took over the country in 1949 and joined the Soviet bloc, only to have a falling out, and then a border clash, with the Soviet Union.
With Xi’s visit, China has made it clear to the world which side it has chosen. It has also made it much easier for the United States to persuade American allies to join efforts in containing China.
“The fault line between the two camps is becoming increasingly sharper,” Hu Wei, a political scholar based in Shanghai, said in an interview. “I have long said that if China cannot make a flexible choice in the Russia-Ukraine war, it will be further isolated.”
Immediately after Russia’s invasion of Ukraine last year, Hu, in a commentary, criticised China’s position on the war. He predicted that the West would be more united, NATO would continue to expand and China could become an international pariah if it didn’t distance itself from Russia. His article was censored within China.
The “Iron Curtain” would “fall again not only from the Baltic Sea to the Black Sea, but also to the final confrontation between the Western-dominated camp and its competitors,” he wrote. “If China does not take proactive measures to respond, it will encounter further containment from the US and the West.”
That’s already happening. In a recent speech, Xi criticised Western countries for their “all-around containment, encirclement and suppression of China” led by the United States. He said that it “has brought unprecedented severe challenges to our country’s development.”
There remain many question marks over the future of China’s economy.Credit:Bloomberg
China is experiencing sharp drops in both export and foreign direct investment, as many multinational companies move some or all of their supply chains out of China. The country’s economic policy has become much more unpredictable under Xi, especially during the “zero COVID” lockdowns last year. And the combination of American trade tariffs and export controls has made navigating China tricky for multinational businesses.
The Biden administration has been trying to persuade others to coordinate on its China policies, especially in blocking access to advanced technologies. US allies, including Japan and the Netherlands, have pledged not to sell their most advanced semiconductor machinery to China. The United Kingdom, after wavering for a while on the infrastructure backbone of its 5G build out, decided against buying equipment from Huawei.
“The COVID-19 pandemic and the war in Ukraine have reinforced the negative perception of China within the European Union,” a group of Chinese researchers wrote in a report. “China’s image in Europe is implicated by its association with Russia.”
Liberal-minded Chinese whisper in private that China’s refusal to condemn Russia’s invasion, and Xi’s friendship with Russian President Vladimir Putin, have both made alliance building by the United States much easier — and made their own lives much tougher.
Chinese businesspeople have found it hard to expand in the West, since many countries have enacted strict rules regarding Chinese investment. Manufacturers have had to move parts of their supply chains outside the country if they want to retain Western clients working to reduce their exposure to China. Many Chinese workers have lost their jobs as a result.
Chinese tech companies are facing significant scrutiny. Citing national security concerns, the US government is pushing ByteDance, the Chinese internet company, to sell TikTok, its popular short-video app, or face a ban in the country. The US has already banned its use on government devices, as have Canada, Britain and EU nations. TikTok’s chief executive, Shou Zi Chew, is scheduled to testify in Congress today.
Feng Yujun, a professor and a top Russia expert at Fudan University in Shanghai, argued in a speech in December that China has paid too much, economically and politically, for its ties with Russia, according to a transcript of his speech.
“We not only need to maintain a long-term friendly cooperative relationship with Russia but also need to maintain a constructive partnership with the United States, because our relationship with the US will determine China’s overall international environment in the future,” he said.
The Biden administration has been trying to persuade others to coordinate on its China policies, especially in blocking access to advanced technologies.Credit:AP
Xi has rapidly been changing the direction Deng laid out. He did not follow the former leader’s guidance that China bide its time and hide its capabilities while developing itself. Instead, Xi bragged about China’s tech power when nearly all of it was built atop Western technologies.
He also has turned China’s cooperative diplomats into confrontational warriors on the international stage. Under him, the Chinese government has repeatedly tried to used its economic weight to coerce any company or any government that dared to criticise it.
Deng was once asked why China attached such importance to its relationship with the United States. He replied, “Looking back over the past few decades, every country that has had good relations with the US has become prosperous,” according to a memoir by a top expert on the United States, Li Shenzhi, a well-known liberal intellectual.
Under Xi, Chinese relations with the United States have turned antagonistic. By contrast, he calls Putin a “dear friend” and seeks to strengthen economic ties with Russia, whose output is close to that of Guangdong Province in southern China and with whom China had a bitter, humiliating history during both the Imperial and Communist periods.
Hu, the scholar, said in the interview that it was not true that the US had always tried to contain China. The US let China into the World Trade Organisation. It increased trade with China. It provided technologies and management expertise when China had nothing. Why did the US-China relations turn sour? he asked. Who should be responsible?
“I won’t discuss this because it’s a sensitive issue,” he said. “I don’t think the responsibility lies with the US”.
He says that China has no reason to complain that the United States doesn’t help it anymore. “Why should I help you if we are no longer friends?” he asked. “Isn’t it foolish to help make your competitor stronger?”
In the end, foreign policy decisions should be made based on whether they help China achieve modernisation and improve people’s lives, said Hu — not whether a leader likes a certain foreign country or not.
For the first anniversary of the war in Ukraine, Hu wrote a follow-up article. He asked whether Putin would still have gone ahead with his “special military operation” if he had known how it would turn out.
“History does not entertain ‘what ifs,’ and what is lost can never be regained,” he wrote. “We can only learn from the lessons, try our best to not cling obstinately to our course and to never repeat past mistakes.”
He concluded: “What is the most tragic is to witness a nation that does not remember its past mistakes.”
His article was about Russia, but he might as well have been talking about China.
This article originally appeared in The New York Times.
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