Thursday, 1 Jun 2023

In Xi’s China, Economic Needs May Take a Back Seat to Security

To revive its sluggish economy, China set out this year to woo foreign investors and stabilize its ties with the West. But these goals are colliding with what China’s leader, Xi Jinping, considers the paramount priority: bolstering national security in a world he sees as full of threats.

Mr. Xi has warned that China must fight back against a campaign by the United States to contain and suppress the country’s rise. In this worldview, foreign rivals are using spies to weaken China’s economy; Russia is not treated as a pariah but a vital partner in blunting the NATO menace; and the diplomatic stage is a place to assert China’s influence and reshape the global order in its favor.

At home, the authorities have sent a chill across foreign businesses by launching a nationwide crackdown on consulting firms with international ties. China’s state broadcaster accused Western countries of trying to steal sensitive information in key industries with the help of consulting firms that help investors navigate the murky Chinese economy.

Abroad, China’s efforts to improve ties with Europe — to drive a wedge between the United States and some of its most important allies — have been complicated by Beijing’s closeness to Moscow. On a visit to Germany, China’s foreign minister, Qin Gang, dismissed criticism that Beijing wasn’t doing enough to end Russia’s war in Ukraine. He also warned that China would retaliate if the European Union decided to impose sanctions on Chinese companies accused of supplying Russia with technology for its military.

China’s increasingly muscular approach has also raised concerns in Canada. That government accused a Chinese diplomat of intimidating and gathering family information on a Canadian lawmaker who was an ardent critic of Beijing’s treatment of Uyghur Muslims. After Ottawa ordered the Chinese official to leave, Beijing expelled a Canadian diplomat in Shanghai in a tit-for-tat move.

“China’s ability to manage multiple and competing interests, domestic and global, is rapidly becoming a defining challenge for Xi,” said Evan S. Medeiros, a professor of Asian studies at Georgetown University who served as an adviser to President Barack Obama.

While that is not new, Mr. Medeiros said, it has become much harder as China’s economic recovery has grown more fraught with export growth slowing and unemployment rates soaring. “Xi seems to think he can both assert themselves and attract other countries, relying on the gravitational force of their economy and global frustration with U.S. power. These are big gambles.”

The campaign against consulting firms has puzzled observers given China’s recent assurances that it was open for business again after three years of strict Covid measures. But the firms’ access to data about Chinese industries, including defense, finance and science, appeared to have triggered alarms in the country's security apparatus, which now takes precedence over economic decision making.

The party has long wrestled with the tension between its distrust of the outside world and the need to maintain global links to power its growth. Mr. Xi, however, underscored at the annual legislative session in March that he prioritized security, calling it the “foundation of development.”

“President Xi has made it pretty clear that security trumps development,” said Ryan Hass, a senior fellow at the Brookings Institution who was director for China at the National Security Council under President Obama.

“If that requires cracking some skulls at the consulting firms and scaring off foreign capital in the process, then that’s a price that he appears willing to pay,” Mr. Hass added.

Ultimately, Beijing is betting that access to China’s expansive market is simply too enticing for foreign companies and governments to give up.

In France, Mr. Qin sought to build on the friendly talks last month between Mr. Xi and President Emmanuel Macron, who had traveled to China with a bevy of French business leaders. Mr. Qin met on Wednesday with France’s foreign minister, Catherine Colonna, and told her that “China stands ready to work with France and other countries to make a bigger pie for cooperation and development opportunities.”

Mr. Macron had advocated for European “strategic autonomy” from Washington, particularly in regard to contentious issues like Taiwan, the self-governing island claimed by Beijing. Beijing wants more countries in Europe to follow Mr. Macron’s lead. But the continent remains deeply divided over China, particularly as Beijing continues to provide economic and diplomatic support to Russia as it wages a war on Western Europe’s doorstep.

The acerbic tone of Chinese diplomats has also done China no favors. Last month, its ambassador to France, Lu Shaye, set off a diplomatic firestorm after he questioned the sovereignty of former Soviet states like Ukraine. The remark, which was walked back by the foreign ministry, may have reflected an outsize level of confidence within the Chinese leadership about China’s lure.

“China believes it has a relatively high degree of flexibility to use aggressive tactics to protect its interests because the Europeans cannot afford to allow for ruptures,” Mr. Hass said. “We’ll get to see that theory put to the test going forward.”

Unease about Beijing’s assertiveness has pushed more countries deeper into the arms of the United States, including long-established allies like Japan, South Korea and Australia, as well as fence straddlers like the Philippines. It has also brought India closer to Washington than ever, something that once seemed unthinkable in U.S. foreign policy circles given Delhi’s history of nonalignment.

Analysts say those sorts of self-inflicted wounds are unavoidable under Mr. Xi’s leadership. The more Mr. Xi feels insecure and threatened, the more his nationalistic tendencies compel him to push back, regardless of the costs.

“The regime has been in a defensive position after the failure of the ‘zero Covid’ policy and the economic slowdown, so Xi has to show a strong face,” said Suisheng Zhao, a U.S.-China expert at the University of Denver. “As long as he feels vulnerable, he will try to project to the world that he’s powerful, stands firm and will defend all of China’s so-called vital interests.”

Even so, talks this week between China’s top diplomat, Wang Yi, and Jake Sullivan, the U.S. national security adviser, hinted at a possible thaw in relations between Beijing and Washington.

As relations with the West teeter, China has intensified its courtship of the global south, holding recent meetings with the foreign ministers of Pakistan and Afghanistan, while Mr. Xi is set to chair the first China-Central Asia Summit on May 18.

“From China’s perspective, considering its deteriorating relations with advanced, democratic countries of the global north, this makes sense,” said Bates Gill, executive director of the Asia Society Policy Institute’s Center for China Analysis.

China’s intention is to be “a much bigger player in the global south,” Mr. Gill added, so that it can “leverage that influence within the larger geopolitical rivalry with the United States.”

Olivia Wang contributed research.

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