Commentary
Both Washington and the European Union (EU) have shown increasing levels of hostility toward Beijing, especially in trade relations. Voices in Washington talk not infrequently about the need to “decouple” the U.S. economy from China’s. The Europeans prefer the word “de-risk,” but it comes to the same thing.
Independently and for their own purposes, U.S. and European businesses are moving in the same direction as their governments, less in deference to the authorities and more because of what is happening in China. This certainly is the message given by three important business groups: the U.S.–China Business Council, the U.S. Chamber of Commerce in Shanghai, and the EU Chamber of Commerce in China. All three groups report what can only be described as a radical and negative change in sentiment among their members.
All the respondents—American and European—gave the same reasons for the growing pessimism and ebbing optimism. Part, they said, grew out of the hostile attitude toward Beijing growing in Western capitals, particularly President Joe Biden’s moves to limit technology exports to China and restrict U.S. investments in Chinese technology.
More than this, they noted the changing Chinese policy environment. Many members called attention to Beijing’s restrictions on the export of rare earth elements and other materials essential to the production of batteries and electric vehicles. Top of the list, however, were China’s new anti-espionage laws and rules governing data collection and cross-border transfers of information.
On this last point, the Americans and the Europeans referenced Beijing’s order that government employees not carry iPhones or any foreign-branded device to the office. More pointed were the reactions to how Beijing has used its new anti-espionage law to raid the offices of the Mintz Group, a U.S.-based due diligence consultant. The cause was data collection on Chinese companies—in other words, the essence of Mintz’s business. Survey respondents further noted how the Chinese authorities then fined Mintz’s Beijing operation $1.5 million. Reflecting on the event, one European business representative bemoaned that, in China now, the red lines of what one can and cannot do have “blurred” and that this inconsistent approach has made the business environment much riskier.
Even more significant, the rise in Chinese labor costs has made operations in Vietnam, Indonesia, the Philippines, and elsewhere in Asia more attractive than in China. These comparisons mean more to those producing in China for sale on the world market than to those who have moved into China in order to sell to that country’s increasingly prosperous population. This distinction no doubt explains why the new pessimism about China is more pronounced among technology and logistics concerns than retailers and service companies.
Washington and Brussels may have their reasons for wanting to distance their economies from China’s. It seems that Beijing has fed into the aims of these Western governments by giving Western businesses independent reasons to “decouple” or “de-risk” from China. In the process, China is losing the Western development and investment that it once enjoyed and that heretofore was such an important part of China’s economic progress.
