Last week, China's dictator Xi Jinping sent Vice Premier Liu He to launch a charm offensive at the annual World Economic Forum (WEF) in Davos, Switzerland, seeking foreign investments to reboot China's economy and rescue his shaking regime. Should the West take the bait?
When Xi addressed the WEF last year, he sounded triumphant. The Chinese Communist Party celebrated its 100th anniversary the year before. Xi declared, "Through a century of tenacious struggle, the CPC has rallied and led the Chinese people in accomplishing remarkable achievements in the nation's advancement and betterment of people's lives...Now, China is marching on a new journey of building a modern socialist country in all respects."
When speaking to the domestic audience, Xi was even blunter, proclaiming that China's rise and the West's decline was inevitable historical trend. China could become the next superpower through self-reliance without foreign capital, technologies, and good relations. Yet now, China faces severe challenges that it won't be able to address on its own.
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While Vice Premier Liu He tried to drum up foreign investments at Davos last week, China reported that its economy grew only 3% last year.
According to the Wall Street Journal, "Aside from 2020, when the economy grew only 2.2%, last year marked the worst year for gross domestic product growth in China since 1976, the year that Mao Zedong's death ended the decade of strife known as the Cultural Revolution." Xi bears the most blame for the significant slow down in China's economic growth.
Xi's crackdown on tech companies and the "disappearances" of well-known Chinese tycoons damped entrepreneur spirits, caused investors to suffer billions of dollars in loss and eroded their confidence in investing in China. Foreign companies found it's increasingly challenging to operate in Xi's China, giving the Chinese government's demand for forced technology transfer and unrestricted access to personal data. Both Microsoft's LinkedIn and Yahoo shutdown their operations in China in 2021.
Last year, Xi's meddling with China's property market led to the collapse of China's largest property company, millions of housing projects left unfinished, and housing prices and demand for housing fell at an alarming speed.
Xi's "zero Covid" policy has done the most damage to China's economy and people's well-being. It had kept businesses and millions of people under cruel lockdowns for the three years and eventually ignited anti-government protests last fall.
Xi's abrupt abandonment of the "zero covid" policy without adequate preparation has led to rising death tolls, and the surge of COVID cases nearly paralyzed China's public health system.
The chaos and instability of China's "reopening" compelled foreign companies such as Apple to accelerate its plan to shift production outside of China.
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As if China needs more bad news, the nation’s long-anticipated demographic crisis has arrived sooner than anyone had anticipated, as Beijing disclosed that the Chinese population declined by 850,000 in 2022.
The last time China’s population shrank was during the Great Chinese Famine (1958-1962), resulting from Chairman Mao’s catastrophic Great Leap Forward movement. China’s demographic problem today is the dark legacy of the Communist Party’s infamous one-child policy, which limited Chinese couples to a single child between 1979 and 2015. The policy had driven down the birth rate in China and resulted in gender imbalance in the Chinese population—men outnumber women by 32 million.
The worst-case scenario prediction is that China’s population may shrink by half by 2100. Compounding the nation’s demographic problem is its aging population. Some predicates that about a third of China’s population will be 60 or older by 2035.
Although Xi is not responsible for China's one-child policy, he bears the blame for being unwilling to admit the party's mistake and eliminate such an inhumane policy outright. Instead, he tried to fix China's demographic problem by making incremental changes. Beijing began to allow Chinese couples to have two children in 2016 and up to three children in 2021. These policies have failed to create the baby boom Beijing had hoped for. The national fertility rate reached a record low last year, with only 6.77 births per 1,000 people.
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China's demographic crisis has enormous implications for its economy and the nation's future. The nation's breakneck economic growth between the 1980s and early 2000s was closely tied to a population dividend--a large pool of young and affordable workers.
Now, a shrinking workforce and an aging population mean that China will no longer be the economic growth engine it used to be. The government will be forced to allocate more national resources to elder care and social services, which means there will be fewer resources to fulfill Xi's geopolitical ambitions.
Aware of China’s short-term and long-term economic challenges, Xi has turned to the West for help. He softened his nationalist posture and reversed some policies in recent weeks to appeal to the West.
He demoted one of his most famous "wolf diplomats," Zhao Lijian, from the foreign ministry spokesperson position to the deputy head of the Department of Boundary and Ocean Affairs. Zhao was combative and antagonistic, adept at using Twitter to spread Beijing’s misinformation, often at the expense of damaging diplomatic relationships. For example, Australia demanded an apology from Beijing after Zhao tweeted a "falsified image" of an Australian soldier threatening a child.
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Xi’s other olive branch to the West was sending Liu He to Davos to reassure global investors. Only a few months ago, at the Communist Party’s 20th party congress, while Xi secured his third term as China’s leader, Liu stepped down from the CCP’s Politburo, the nation’s highest decision-making body.
Since many westerners regard Liu as a reformer and more pro-private businesses than Xi, Liu's "retirement" was seen by many as Xi prioritizing politics over economic growth. By sending Liu to Davos, Xi signaled that he would prioritize economic growth and foreign investments are welcome.
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But Western governments and businesses shouldn’t be fooled by Xi’s temporary policy retreat. Minxin Pei, a leading expert on the CCP, once wrote that the CCP has a long history of being patient, flexible, and cunning when weak. Yet when "the balance of power has shifted in its favor," the CCP "has consistently been willing to break its earlier commitments when doing so serves its interests."
Xi is no different. Recently, he promoted a hardliner sanctioned by the U.S. for enforcing a national security crackdown in Hong Kong as the head of China’s liaison office. On the same day when Liu He was assuring global investors that China reopened for business, Hong Kong authorities arrested six people for selling books related to the city’s 2019 pro-democracy protests. Under Xi, China still stands firm with Russia despite international condemnation of Russia’s invasion of Ukraine. Revenues from exporting energy and agriculture products to China are what has sustained Russia.
Xi also reiterated that he would not give up "reuniting" with Taiwan through force at the 20th party congress last fall. Clearly, Xi wants only Western capital and technology to rescue China’s economy and thus strengthen his regime.
He remains deeply hostile to Western democracies and liberal values. Western governments and businesses should remember the true nature of Xi and the CCP regime and not take Xi’s bait this time.
