Since globalization in the modern era started in the 1990s, China has undoubtedly been one of the main beneficiaries to this development. According to many analysts, globalization has been the engine that has given China the highest export share in the world economy at 14 per cent of GDP and lifted 700 million Chinese out of poverty and into the middle class. Therefore it is no wonder that President Xi is embracing the role as the leading figure of globalization, especially as protectionist winds are blowing in the US and Europe, which leaves the field open for leadership.
China’s ambition to wear the jersey of globalization has manifested itself in the formation of the Asian Infrastructure Investment Bank and the Silk Road Fund, which main focus area is to finance and invest in infrastructure development along the ancient Silk Road and the water ways towards Africa and Europe, the so called One Belt One Road initiative. But actually, how credible is China as a leading figure in globalization?
Several surveys among Western companies operating in China suggest a tougher business climate in China and a China which is less friendly to Western companies. Many feel aggrieved in relation to local competitors, and some report that they no longer feel welcome in China.
In parallel with Xi Jinping’s market-liberal reform agenda, we see how he strengthens the Communist Party’s power and involvement in state-owned businesses, which may seem like a contradictory development for us in the West. But it is his way to curb the widespread incompetence and corruption that among other things has led to massive waste of resources, environmental degradation and over-capacity in many industries. In order to ensure functioning markets without regional favoritism, President Xi has appointed party cadres to provide checks and balances in the regions. Xi Jinping decision to increase the CCP’s involvement in the business is thus an indication that the regional protectionist agenda is not centrally sanctioned.
If this hypothesis is true, then China is perhaps a credible champion of globalization. With President Xi Jinping in power, the way of doing business with and in China has changed. Going forward foreign companies must change their mode of operating in China. Foreign companies must engage with China in a much more comprehensive way than before, such as participation in the development of industry standards so that they are not excluded from the market. Also it is necessary to invite Chinese market participants and authorities in international fora, where standards and procurement policies are discussed and decided. The new normal in China will simply require a more committed and long-term approach by western companies in China.
Handelsbanken Greater China