CLAREMONT, California (Union Project) —At the beginning of last month, China’s legislature, the National People’s Congress, officially approved the country’s 14th Five-Year Plan. The strategy was supposed to demonstrate that China has a long-term economic vision that will allow it to prosper, despite the country’s geopolitical competition with the United States.
Xi is now undermining his own good work by poisoning relationships with critical business partners. ”
The centerpiece of the 14th Five-Year Plan is the “dual circulation” strategy, according to which China will aim to foster growth based on domestic demand and technological self-sufficiency. This will not only reduce China’s dependence on external demand; It will also increase the dependence of its main trading partners, except the United States, on access to its market and increasingly high-tech manufactures. Crucial negotiation with Europeans China has laid the foundation for this strategy for a while. In particular, late last year, President Xi Jinping concluded the Comprehensive Investment Agreement (CAI) with the European Union. It had to make some concessions to get there, but it was worth it: The deal had the potential to not only deepen ties between the EU and China, but also to drive a wedge between Europe and the US. But now Xi is undermining his own good work. , poisoning relationships with critical business partners. Over the past two weeks, China has blacklisted various members of the European Parliament, British and Canadian legislators, and academics and research institutions in Europe and the United Kingdom. China announces retaliatory sanctions on the UK The sanctions were undoubtedly retaliatory: the EU, the UK and Canada had sanctioned a small number of Chinese officials implicated in continuing human rights abuses against the majority Muslim Uighur minority in the Xinjiang province. While these abuses are nothing new, recent reports that Uighur forced labor is being used to harvest cotton have highlighted them.
“China’s antagonistic response to concerns about the use of forced labor in Xinjiang suggests that its leaders believe that the Chinese market is simply too lucrative for Western companies or governments to abandon. They may be exaggerating. ”
China is sanctioning its critics to show its outrage at these accusations, which it insists are politically motivated lies. But whatever message the sanctions are supposed to send, they are unlikely to be worth it. The interests of China, Canada, Europe and the United Kingdom have so far remained relatively neutral in the Sino-US rivalry, and it is in China ‘s interest that they remain. that way. China can afford an economic decoupling with the US (it will be costly though). Simultaneous decoupling with the rest of the major Western economies cannot be allowed. The CAI is already under threat. The deal has yet to be approved by the European Parliament. But, to protest Chinese sanctions against some of its members, Parliament canceled a recent meeting to discuss it. Some lawmakers now argue that China should ratify the International Labor Organization conventions on forced labor before the CAI is ratified. Further undermining its economic prospects, China is targeting private companies for expressing concern over the forced labor allegations. Last year, the Swedish clothing retailer H & M HNNMY, -0.22% announced that it would no longer use cotton from Xinjiang, because it was too difficult to carry out “credible due diligence” there. Heated, H & M’s statement has resurfaced and sparked a barrage of criticism. China’s major e-commerce companies have pulled H&M products from their platforms, and Chinese celebrities have canceled deals with the brand. And, encouraged by state media, a movement to boycott H&M, as well as other Western brands that reject Xinjiang cotton, such as Nike NKE, -2.12%, New Balance and Burberry BRBY, + 1.01%, it is gaining momentum. H&M, Nike and Other Clothing Brands Boycotted in China by Xinjiang Sanctions China appears confident that its intimidation tactics will succeed. After all, Western multinationals don’t want to be pushed out of China, a major growth market. And in fact, H&M has already released a new statement highlighting its “long-term commitment” to China and expressing its dedication to “regaining the trust” of its “customers, colleagues and business partners” there. However, China may be exaggerating. Just as Western multinationals want to sell their products to Chinese consumers, Chinese companies need these companies to continue to source inputs from them. These are mutually dependent relationships. In short, while China’s market size may be attractive enough to win concessions from multinationals, it is not worth jeopardizing its reputation in the West, which still accounts for the vast majority of its companies. income. For example, H & M’s two main markets are the United States and Germany; China is its third largest market, but it accounted for only about 5% of its total revenue in 2020. In other words, H&M can afford to lose access to the Chinese market. But its 621 Chinese suppliers may not be able to afford to lose H&M as a buyer. More generally, an exodus of Western multinationals from China would inevitably force the supply chains that serve them to move as well, leading to the closure of Chinese factories and the loss of millions of jobs. There is still time for the Chinese government to change course. That means allowing independent experts to carry out an investigation of cotton farms in Xinjiang to begin with. If China is not really using forced labor, this is the best way to demonstrate it and improve relations with Western companies and governments. But such a sensible answer seems unlikely, especially since China’s leaders remain convinced that their market is simply too important to abandon. They should remember that, not long ago, they were absolutely certain that the United States could not afford an economic disassociation from China. They were wrong then, and they may well be wrong now. The difference is that, this time, China cannot afford a decoupling either. This comment was published with permission from Project Syndicate – China’s Economic Self-Injury Minxin Pei is a professor of government at Claremont McKenna College and a non-resident senior fellow at the German Marshall Fund in the United States.