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Monday, December 4, 2023

USA-China summit: Beijing solicits investments

At the APEC summit, President Xi Jinping also wanted to regain the trust of the business world. In doing so, he damaged the relationship himself.

President Xi at an event.

President Xi at the APEC summit in San Francisco, enthusiastically received by business representatives Photo: Carlos Barria/Reuters

BEIJING taz | The moment Xi Jinping enters the ballroom of the Hyatt Regency is likely to trigger a feeling of embarrassment in many observers: the entire liberal economic elite of the United States greets the autocrat who has arrived from the People’s Republic in San Francisco with a standing ovation. Hundreds of CEOs pulled out their smartphones at the same time to take a photograph of the head of the Chinese Communist Party to thunderous applause. And you think you can see the dollar signs flashing in their eyes.

President Xi was by no means just in the USA to repair political relations with Joe Biden. The aim of his mission was always to restore the damaged trust of Western investors and companies. He always had a promising offer with him: the prospect of a market of 1.4 billion potential customers.

And the euphoria obviously spread to the CEOs present. They paid $2,000 to dine in the same room with Xi Jinping during the reception on Wednesday. Ray Dalio, founder of the hedge fund firm, told the Financial Times he was “thrilled to have this relationship with Xi.”

During his speeches, the state guest painted an extremely rosy picture of the status quo of his economy. The next day, during the Asia-Pacific Economic Cooperation (APEC) summit, Xi said that China’s economy had “steadily recovered and developed for the better” this year. He described the “socialist market economy” as a particular strength and then added unequivocally: “We invite friends from the international business world to invest in China and deepen their footprint in China.”

Precarious reality

Long-time observers are of course aware that Xi’s ostentatious display of self-confidence was primarily intended to mask the extremely precarious reality. The People’s Republic of China has been recovering for almost a year after the end of the draconian “Zero Covid” policy only slowly: the real estate crisis continues, youth unemployment is at record levels and domestic consumption is still not getting off the ground.

Many of the economic problems are directly related to the strained relations with the political West. The Biden administration’s tech sanctions are just the most obvious example. In addition, investors are withholding their funds and companies are increasingly withdrawing profits from the Chinese market. In short: the situation is serious and there is an urgent need for action.

But of course Xi is right when he sells his home country in San Francisco as the biggest engine of global growth. The huge market still has a huge appeal for international companies – even though it remains far behind its true potential.

Many economists now assume that China’s growth will level off at between two and three percent in the next few years. This is sobering for a country that not so long ago was experiencing double-digit expansion.

Political control instead of more economic growth

Xi Jinping himself bears part of the responsibility for this. “I have never seen ideological decisions become more important than economic decisions,” said China veteran Jörg Wuttke last year. The manager has been living in Beijing for over three decades. But towards the end of his term as President of the European Chamber of Commerce, he drew a sobering conclusion: Xi Jinping is increasingly willing to pay for political control with lower growth.

When Xi now warns in San Francisco about the decoupling of supply chains, this cannot be without a certain irony, after all, the lockdowns of his dogmatic “Zero Covid” policy only triggered the issue in Europe. And the desire to “connect” economies more closely also seems hypocritical from a head of state who has been leading an increasingly self-sufficient industrial policy since 2015.

While the CEOs in San Francisco greet Xi with a standing ovation, local economists are gradually losing patience. The discontent within the private sector has become so great that open criticism is now being expressed for the first time in a long time.

The rule of law and reforms would be necessary

In the business magazine Caixin, one of the last unyielding voices in an otherwise uniform media landscape, published a remarkable editorial earlier this month with an unmistakable headline: “China’s reform movement urgently needs another breakthrough.” It says, among other things: “Granting the market a decisive role in the allocation of resources is not only a significant theoretical innovation, but also a liberation of thought.” However, some government officials are now acting against the spirit of reform again.

Veteran investor Fred Hu, founder of the “Primavera Capital Group,” is obviously also of this opinion. Speaking at a business forum in Singapore, he said: “People are not sure whether the leadership is still committed to reforms, from which China has benefited so much.” He has never experienced this feeling of insecurity since economic liberalization began in the late 1970s.

A few days later, this time at a forum in Beijing, Hu doubled down on his criticism. China doesn’t need another 30-point plan to increase business confidence, but just one point: the rule of law.

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