Home Business Chinese firms don’t believe the policy uplifts anything at all

Chinese firms don’t believe the policy uplifts anything at all

The evolving Western policy toward China, now centered around the concept of “de-risk, not decouple,” is being met with skepticism from Beijing, which questions the actual difference between the two approaches.

However, for businesses operating in this complex landscape, the semantics of the policy take a back seat to the practical challenges they face.

As tensions between Western allies and Beijing continue to escalate over a range of issues, from sensitive technology disputes to differing positions on Russia and Taiwan, companies with exposure to China are increasingly concerned about contingency planning and navigating the ever-expanding web of regulatory complexities.

In recent interviews with numerous Western business executives, the sentiment was unanimous – the situation demands careful strategic thinking.

The response to this shifting environment varies depending on the business and its level of direct and indirect engagement with China. The executives emphasize that decisions regarding complete separation or maintaining some level of involvement depend on factors unique to each company.

Amidst the growing suspicions on both sides – from China and the United States – CEOs find themselves preoccupied with the pressing need to chart a clear path forward.

Henrietta Fore, former head of UNICEF and board member of major companies, reflected on the prevailing climate: “There’s enormous suspicion on the Chinese side and on the American side.

I’d say 90% of CEOs are consumed with how to plan properly for this.” In a world where uncertainties abound, everyone is striving to minimize dependencies and adapt to the evolving landscape.

While some businesses may choose the path of separation, for many others, complete disengagement from the Chinese market is not a viable option.

They recognize the potential opportunities that China offers and find alternative strategies, such as relocating supply chains entirely out of the country, to be prohibitively costly and impractical.

In contrast to the separation approach taken by Sequoia, a venture capital firm that recently announced the division of its Chinese and Indian businesses into independent entities, several prominent business leaders have recently embarked on trips to China.

Executives such as JPMorgan’s Jamie Dimon, Citigroup’s Jane Fraser, and Tesla’s Elon Musk have made these visits, demonstrating their commitment to maintaining relationships with staff, clients, and officials in China.

Speaking on condition of anonymity, a financial services CEO who visited China earlier this year shared his motivations for the trip.

He aimed to provide support to colleagues grappling with uncertainties in the current environment and demonstrate his firm’s intention to remain engaged with China.

However, he has chosen to keep a low profile, underscoring the sensitivity of the situation.

When confronted with the question of how to plan for worst-case scenarios involving a severe escalation of tensions, such as those related to Taiwan, the CEO admitted to feeling unsure about the way forward.

The economic ramifications of a conflict would be immeasurable, leading him to believe that such a scenario is seemingly inconceivable.

While the United States has been implementing export controls on sensitive technologies and urging Western companies to reevaluate their supply chains, Beijing is actively seeking to reduce its reliance on foreign expertise.

Simultaneously, it is exerting more pressure on companies through actions such as conducting raids on consultancies and enacting an anti-espionage law.

In response to the nuanced approach advocated by Western allies, China remains skeptical, characterizing it as a disguised form of decoupling. Xinhua, the Chinese state news agency, described de-risking as “decoupling in disguise.”

A senior diplomat also voiced opposition, particularly if de-risking translates into severing China’s global industrial and supply chains, especially in critical sectors.

Businesses are grappling with the challenge of maintaining profitability while adhering to intricate rules, particularly those concerning national security that may lack clarity.

Navigating these complexities requires a delicate balance between complying with regulations and avoiding inadvertent missteps that could have severe consequences.

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