President Xi and the ‘end of an era’ in China

EU Chamber of Commerce President Joerg Wuttke outlines the business realities in the world’s second-largest economy

German Chancellor Olaf Scholz is scheduled to meet with Chinese President Xi Jinping in Beijing on Friday. Scholz heads a delegation of business executives as the first European Union leader to visit the country since the start of the Covid-19 pandemic.

The trip also comes less than two weeks after Xi secured an unprecedented third term in office.

Ahead of the planned talks, Voice of America’s Mandarin Service interviewed Joerg Wuttke, the president of the EU Chamber of Commerce. A respected China observer, he has spent 30 years in the world’s second-largest economy.

Below, Wuttke talks about “decoupling,” policy shifts, and the “economic price” Xi appears willing to pay.

This article is republished courtesy of Voice of America. Read the original article here.

Voice of America Mandarin: Obviously a big moment has passed. The Communist Party’s Congress is now behind us. What was your first impression or first reaction to the members, to the names of the new Politburo Standing Committee, and to the Politburo?

Joerg Wuttke: It was definitely a surprise. We have greater clarity now. Xi Jinping is obviously calling the shots to an extent that we didn’t see before. He has aligned a group of people that are totally loyal to him. We have basically left the sphere of achievements and meritocracy. It is all about loyalty.

VOA: The premiership will go to Li Qiang, who is currently the Shanghai party chief. Tell us about your impression of him.

Wuttke: Well, I never met Li Qiang, but what actually concerns me more than an individual is that since 1988 we have never seen a premier coming into office that did not shadow his predecessor. So, in a way, we have for the first time someone, who is running a city, and becoming head of the state council, which of course is a totally different ship to maneuver. So, I guess that’s going to be very difficult. Also, the head of the economy, Xuexiang Ding, will be someone who is not acquainted with business.

VOA: Other than Li Qiang, there are other important people replacing current members of Xi’s economic team. What about them?

Wuttke: We are in a turbulent time. We have a real estate crisis. We have a severe impact from US sanctions. We have an increase in debt as well as the uncertainty about when are we getting out of Covid lockdowns. It would be great to have a stable team on the economic front in order to tell the market where we’re heading. And we don’t. We are basically entering a period of uncertainty. But the uncertainty is by design. President Xi [has] decided to have a group of loyalists with him in the Politburo. So, let’s see whatever happens.

Joerg Wuttke has spent 30 years in China. Photo: Courtesy CGTN

VOA: On another occasion when you spoke with news outlets, you talked about how the Chinese Communist Party is not monolithic. There are a variety of views. Some are more liberal, more pro-market and others like Xi are more pro-state. After this reshuffle, do you think there will be a more liberal voice in the next administration?

Wuttke: Well, there always will be different voices and the fifty shades of grey about where to steer the country. But it’s very clear in [Xi’s] speech [before the Party Congress. He] mentioned Karl Marx 15 times. He mentioned the market three times, and it was clearly indicating that he expects international tension.

He mentioned struggle 17 times and 12 times in the context of international affairs. So, he’s preparing the country for struggle, and struggle means … uncertainty and difficult times. He’s trying to obviously rally the population behind him. And we have to see what that leads to. We have an engagement with Chancellor Scholz.

His visit might give an indicator if Xi wants to engage with foreign countries, with Europe in particular, as he has been off the [grid] for 1,000 days. [It] will be very interesting to see how this kind of vision of struggle translates into engagement with foreign leaders. Is he trying to accommodate? Is he trying to reconnect with them in positive terms? Or is that going to be all about struggle and offense in a way?

VOA: Compared to four or five months ago, are you now more pessimistic or more optimistic about China in the next three or five years? Or do you believe there has been no change?

Wuttke: I’m trying to be realistic in order to [see] which direction this might go. We have not entered the space where we know where we’re heading. I have been here for about 30 years. I grew up [during the] ‘opening up’ [period under] Deng Xiaoping.

[During] my first Party Congress in 1982, I witnessed Deng Xiaoping clearly trying to integrate China [with the rest of the world]. [Now,] maybe at the tail end of my career, I am witness[ing] China actually closing up again to some extent. So, in a way, it’s a full circle which is, of course, disappointing.

VOA: Do you see decoupling down the road? How confident are you, as a member of the business community, about the new leadership, particularly, when it comes to the economy?

Decoupling from China will be difficult. Photo: Creative Commons License

Wuttke: Decoupling is hard to achieve because China is the globalization story, meaning that [the country] is deeply embedded in many, many markets. But decoupling is on the cards [and] can only be achieved in small steps because we want to remain coupled. We want to be connected. So, in a way, we have a situation where, when you talk about struggle, about self-reliance, that is a strong indicator that China actually actively wants to decouple.

That would be very sad. I think it would actually mean lower growth potential and [it] will also have a negative impact on the global economy. Is it going to [happen]? I’m not sure, but certainly, we will see some baby steps in that direction. Let’s hope that pragmatism and reason prevail because we have too much to lose, frankly, if we do decouple.

VOA: Are we going to see foreign businesses from Europe, the United States and elsewhere retreat from China? Are we going to see more people leave the country?

Wuttke: We see more people leaving China, that’s clear. [But] we don’t see [major] companies leaving. We see more engagement in the top 10, for example, of European companies. That’s primarily German – cars, chemicals, mechanicals, and types of machinery. Because there’s no other choice. They have to be here, and they have to be there more engaged.

But then those 10 companies don’t necessarily stand for [the] 1,800 members that the European Chamber is representing. We have not seen companies moving away, but what we have noticed is that new investment [and] new activities from those [firms have] been rerouted to other regions. So, we see more interest in Thailand, Southeast Asia [and] India. Closer to home [that means] Turkey and Eastern Europe [because] executives can fly in and out easily.

The World Bank has predicted China [will] grow 2.8% this year and the rest of Asia 5.3%. These leaders follow the money and, hence, there will not be an exodus of European business from China. But we will definitely be underachievers given the potential of this economy.

VOA: Do you think the Chinese leadership, particularly Xi and his other senior advisers, are aware of the situation that their economy is not in good shape and foreign businesses are leaving, or at least putting investments on hold?

Wuttke: They must be aware of this. But again, if you have a totally different policy approach, then actually, you know, foreign business doesn’t mean too much to you. Yes, you need it in order to make sure that you can close the technology gap. But [Xi] made it very clear that his focus is on state-owned enterprises. His primary goal is not necessarily growth. It is about security [and] stability. It’s about wealth distribution. It’s about common prosperity.

VOA: You said that it’s the end of an era for China.

Wuttke: Yes. Clearly, [the] Jiang Zemin [and] Hu Jintao era was all about integrating China peacefully. It was all about getting rich first and powerful later. But now basically, as Mao unified China and Deng made it rich, it seems like Xi’s focus is making China powerful.

Adrianna Zhang contributed to this VOA report.

This interview has been edited for length and clarity.

This article is republished courtesy of Voice of America. Read the original article here.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.