Visitors take photos with Jinbao, the mascot of the China International Import Expo in Shanghai, November 8. Chinese importers inked deals amounting to US$70.72 billion. What evidence here of the xenophobic shunning of foreign goods? Photo: Xinhua
Opinion
Outside In
by David Dodwell
Outside In
by David Dodwell
Who says China is retreating into splendid self-isolation?
China’s trade and FDI numbers continue to rise and its industrial policies aim to strengthen the domestic economy and plug manufacturing vulnerabilities – not decouple
For more proof, look to its long-standing engagement with international bodies and the outreach of its Belt and Road Initiative
Once upon a time there was a narrative: after three decades of opening up to the global economy, winning access to international markets and capturing what intellectual property it could, China is reverting to a centuries-old preference for self-isolation.
In deciding to decouple from global markets, using its Made in China 2025 policy to strengthen the capacity of, and loyalty to, local companies, and a dual circulation strategy to bolster local consumption as the main growth driver, Beijing has made it harder for foreign companies to sell to or operate in China, and for foreigners to live and work there.
Therefore, Western economies must prepare for the worst, economically and militarily, as China recoils from global cooperation in the belief the world needs China more than it needs the world.
But there is a small problem. The narrative is false – even as the Financial Times’ Gideon Rachman gave it a robust airing recently after China’s President Xi Jinping opted not to fly to the G20 and COP26 summits.
“Xi’s dismissive attitude to the climate talks was not so much Middle Kingdom as middle finger,” said Rachman. “The Chinese leader’s refusal to travel to Glasgow for COP26 … is part of a broader pattern of national self-isolation. “The effects on international business [of China’s self-isolation] are already apparent. China continues to trade and invest with the outside world. But business ties are fraying.”
Setting aside Rachman’s contestable claims that international executives are leaving China and that Hong Kong’s role as a global business centre has taken a battering, his claims of China’s self-isolation are emphatically misplaced.
In the first nine months of this year, China’s exports grew by nearly 24 per cent, with imports up by 26 per cent. Utilised foreign direct investment (FDI), at US$113 billion to the end of August, was up by nearly 28 per cent. China remains among the top FDI destinations worldwide. These are not the sort of trade and investment numbers that suggest disengagement.
Ironically, Rachman’s article coincided with the China International Import Expo in Shanghai, visited by 480,000 buyers, where 2,900 international companies, including over 280 Fortune 500 companies, pitched to Chinese importers, with deals amounting to US$70.72 billion. What evidence of the xenophobic shunning of foreign goods?
01:27
International coffee brands brew up new business in China as demand grows among young generation
International coffee brands brew up new business in China as demand grows among young generation
Ironic, too, that the article coincided with Alibaba’s Singles’ Day shopping extravaganza, an event that achieved US$84.5 billion in orders over its 11-day period, compared with US$74 billion last year. Chanel, Gucci, Prada, Balenciaga, Christian Louboutin and, for the first time, Hermes and Saint Laurent were prominent. Scant evidence here of Chinese consumers shunning Western luxury goods.
The facts Rachman used to suggest China’s growing isolationism can be perfectly explained without resorting to any world-stability-threatening narrative. Xi did not fly to Rome or Glasgow. But neither he nor any of the other six members of the Politburo Standing Committee have left China since the pandemic.
One can complain about the severity of China’s Covid-19 lockdowns and travel restrictions, and the dislocation for Chinese and foreign businesses alike, but it is crass to suggest this is part of a devious plan to purge China of foreigners and foreign businesses – still less to snub the climate summit or dismiss the urgent need to reduce carbon emissions.
00:00
China transforms barren Saihanba in Hebei to one of the world’s largest man-made forests
China transforms barren Saihanba in Hebei to one of the world’s largest man-made forests
The more serious claims of China turning inward focus on the Made in China agenda and dual circulation policy. But you don’t need a xenophobic mindset to justify them. China’s policymakers have long recognised that the low-value-adding assembly role they captured in global manufacturing supply chains was a mug’s game.
Denied access to the innovation- and technology-intensive high-value-adding roles reserved for Western workforces, China means to capture higher value-adding roles in the supply chain, lifting its technology input and generating higher workforce incomes. These higher incomes aim to reduce poverty and build a strong domestic consumer economy.
The US trade war against China reinforced Chinese paranoia over its manufacturing sector’s vulnerabilities. When the US government is blocking access to semiconductors and your hi-tech enterprises rely on foreign suppliers for 85 per cent of their needs, the logical response is to reduce that vulnerability – an astute response to a clearly defined commercial threat.
06:01
There’s a global semiconductor shortage and this is why it matters
There’s a global semiconductor shortage and this is why it matters
Dual circulation is also nothing to do with xenophobia or splendid isolation but a recognition that China’s consumer market is globally significant and potentially a strong economic driver.
That domestic consumption accounted for just 39 per cent of China’s economy last year, compared with about 50 per cent in the European Union and 67 per cent in the United States, screams the reality that China’s consumer economy has a long way to grow. A policy focused on strengthening domestic consumption makes good sense.
Meanwhile, China’s commitment to engagement with the global economy has been glaringly consistent for the past 30 years.
Deep engagement in the World Trade Organization, World Health Organization and across UN bodies – including sending over 50,000 troops to nearly 30 UN peacekeeping missions since 1990, more than any other permanent Security Council member – proves China’s multilateral commitment, not to mention intensive engagement in the Asia-Pacific Economic Cooperation forum and Regional Comprehensive Economic Partnership, and efforts to build the Belt and Road Initiative across Asia and Africa.
Over the past month, Xi has had calls with Japan’s Fumio Kishida, Germany’s Angela Merkel, Singapore’s Lee Hsien Loong, the EU’s Charles Michel, France’s Emmanuel Macron and Britain’s Boris Johnson. This week, he joined the virtual Apec leaders’ meeting. And plans are afoot – at last – to talk to Joe Biden. Be clear, China is not headed towards splendid isolation.
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view
