Misreading China

Why the West always lurches to extremes in its China analysis.

Job fair in Qingdao, China, 2023. (Photo by Costfoto/NurPhoto via Getty Images.)

China’s economy is in trouble. Foreign investment is plummeting; youth unemployment is at an all-time high. Prices have experienced their sharpest drop since the global financial crisis. Debt has climbed to 282% of GDP. In the West, mainstream media have no doubt that China is heading for disaster. The country is becoming “uninvestable,” we hear, “the condition is systemic.” How have we moved so quickly from glowing exuberance to such a drastic lack of confidence?

The only thing predictable about China, says Bettina Schoen-Behanzin, vice president of the European Chamber, is its unpredictability. “That is poisonous for the business environment,” she says. While it may well be a good idea to disengage from an aggressive, expansionist, totalitarian state, the notion of imminent collapse seems likely to fall wide of the mark—just like the euphoric praise of recent years, another iteration of the West’s chronic tendency to misread China, viewing it always through extremes.

It is worth remembering that it was not so long ago—little more than a decade—that Beijing responded to the global financial crisis with stimulatory force and plunged Western observers into rhapsodies. China, they said, had just saved the world economy. Even mid-pandemic, with the Second Cold War raging and China-West relations in precipitous decline, the mood remained upbeat. Global capital continued to flood into China via Hong Kong. Firms were ebullient: prospects in China were “remarkable,” according to Starbucks, “phenomenal,” according to Apple. Siemens declared itself “very happy.” In 2020, the value of U.S. dollar payments cleared in Hong Kong hit a record $11 trillion. By 2021, one managing partner at a global law firm reported that overwhelmed managers were actually turning Western money away.

Two years on, it’s a very different story. Apple, Samsung, Volvo, and Adidas are all moving or have already moved key production out of the country. According to the insurer Willis Towers Watson, 95% of multinationals are now concerned about the risks of doing business in China—a remarkable leap of 33% since 2021.

China’s Emperor-In-New-Clothes has no answers. Bereft of ideas, he hides from international summits to avoid embarrassment, launches criminal investigations into the CEOs of beleaguered property companies, and makes the tone-deaf suggestion to the Chinese people that they should “eat bitterness.” The future looks unremittingly dark. China’s public has lost confidence, the Great Helmsman’s incompetence has been laid bare for all to see, and now the cold, hard, implacable laws of demographics guarantee decline. But this is likely to be a slow process. Barring an invasion of Taiwan, which would hasten collapse as well as incalculable chaos, China will probably remain the world’s number two economy for quite some time yet.

Whether media or multinationals, the West has a track record of getting China wrong. Like Bettina Schoen-Behanzin, we scratch our heads at the nation’s unpredictability, its inscrutable otherness. But in truth, there is no big mystery. We’re just not peering closely enough. An amusing example of this type of misunderstanding occurred back in the early 1970s, as Henry Kissinger was making his first overtures to the CCP. Kissinger asked Premier Zhou Enlai for his opinion on the French Revolution. Zhou replied: “It’s too early to say.” Delighted Westerners repeated this line ad nauseam over the years. So pithy, so zen! Clearly, we assumed, the Chinese function on a very different timescale to their Western counterparts. Clearly, they wait with serene and superhuman patience, meditating like Buddhist monks while history slowly unveils its deepest lessons. It would be several decades before the translator present at the meeting finally revealed the truth: Zhou Enlai had been referring to the Paris riots of 1968 (only a few years prior), rather than the epochal events of 1789. Not so grandly mysterious after all.

A more clear-eyed reading of the past decade would show those celebrated sages at the head of the Communist Party to be notably short-sighted. They lurch about wildly, making mistake after mistake. Cast your thoughts back: the one-child policy that condemned the country to long-term demographic catastrophe; the Tiananmen Square Massacre that almost isolated China on the international stage; the Falun Gong persecution that transformed an eccentric and harmless religious group into a high-tech global organisation hellbent on bringing down the CCP. And most recently, of course, the idiocy of Zero-COVID, which turned a significant proportion of young Chinese against the Party.

Zero-COVID also shows us how the authorities can self-correct on occasion. Public protests prompted the president to drop his previously inflexible policy. Perhaps we will see the same thing again. Beijing has thus far resisted calls for a massive stimulus plan, but the persistence of China’s economic woes may lead the central government to give in. The leaders of the Communist Party wobble and vacillate. They do not operate on multi-centennial timescales.

Why do we get them wrong so frequently? The answer is probably a combination of a couple of factors. The Party has always been tight-lipped and paranoid, making reliable data hard to come by. This necessitates guesswork. But there is also the problem of our human tendency to ascribe agency to natural economic processes. The rise of the Chinese economy in the 1990s and 2000s was astonishing; unprecedented. We were told it was a miracle, and we internalized this idea of the Party as an organization of miracle-workers. In truth, there was nothing miraculous about it. The Australian public intellectual Clive Hamilton has given us the clearest picture of what really happened: “The Communist Party did not lift 600 million people out of poverty [as it likes to boast]; it kept 600 million people in poverty.” For thirty long years the Party’s foot was firmly planted on the neck of the people, and only when its foot was lifted were the people finally free to start businesses, own properties, and gradually lift themselves out of poverty—not through miracle-working but through the advent of more normalized economic processes.

I often think of the elation that greeted the President’s unlikely promise, three years ago, “to have [carbon dioxide] emissions peak before 2030 and achieve carbon neutrality before 2060.” Once again it was suggested to us, by Western journalists, that Xi Jinping may have “just save[d] the world.” He hadn’t saved the world, and he never will. A decade ago, scholar Julia Lovell painted a much more realistic picture of the Chinese leadership, calling it an “improbable high-wire act, unified by ambition, bluff, pomp, and pragmatism.” If we understood this, and if we saw the men at the head of the Party for the chaotic rabble of blundering thugs and lucky gamblers that they are, then our analyses would look less foolish in retrospect.

Aaron Sarin is a freelance writer living in Sheffield, currently focusing on China and the CCP.

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