Beijing must feel the pinch. The economy is not doing well, either domestically or with trade or investment flows, and the once-great global enthusiasm about China business has ebbed among Americans, Europeans, and the Japanese.
It is hard to miss Washington’s obvious hostility toward China trade. Chinese officials, in response, have, in recent months, set out to woo business and political leaders in every sphere of the developed world. If, in all this, Beijing has suffered no outright rejection, it has felt little warmth.
The roots of Beijing’s desperation are clear enough. At home, a severe and persistent property crisis has brought down home buying and construction activity. In part because of the loss of wealth in the property crisis but for other reasons as well, Chinese consumers remain reluctant to spend, while Chinese leader Xi Jinping’s former hostility toward private businesses has soured their willingness to invest in expansion or hire new workers.
Exports have lagged because of the varying degrees of hostility toward China trade exhibited by governments in Washington, Brussels, and Tokyo, as well as because businesses in these regions are actively diversifying their foreign operations and sourcing away from China.
This lack of domestic and foreign economic support has led to what can only be described as Beijing’s recent “charm offensive.” The objective is to help boost the economy by winning back some of the former foreign enthusiasm about China that once helped propel rapid Chinese development.
At the Asia-Pacific Economic Cooperation summit in San Francisco last November, Xi met with American business leaders, reassuring them they were welcome in China and would find a fertile business environment there. Earlier this year, he invited a larger group of American business leaders to Beijing to hear the same message. Shortly after that show, Xi traveled to Europe to tell political and business leaders the same thing. Both the Americans and the Europeans gave him a positive reception, polite and friendly, but neither effort elicited much of a substantive response. Neither investment flows nor trade have picked up much, if at all.
Most recently, Beijing tried much the same thing with South Korea and Japan. Chinese Premier Li Qiang met with South Korean President Yoon Suk-yeol and Japanese Prime Minister Fumio Kishida in Seoul. In the first such gathering since 2019, he aimed to promote trade among the three economies and invite investment into China.
Mr. Li, in many ways, made the South Koreans and the Japanese the same promises that Xi made to the Americans and the Europeans, but he went a step further. He tried to revive the idea of a three-way free trade agreement—talks first mooted in 2012 but largely stalled since. At the same time that Mr. Li emphasized the common Asian heritage of the three nations, he also, it seemed, made an effort to split either or both countries from their close economic and diplomatic tie to the United States.
Everyone was very polite in Seoul, as were the Americans and Europeans, but it is not apparent that Mr. Li got anywhere substantive. There was the usual rhetoric about cooperation on trade and clean energy, but nothing concrete came out of the meetings, not even a plan, much less a commitment. Though Mr. Li insisted on separating economics and trade from diplomacy and security, security issues nonetheless soured the meetings.
Both Mr. Yoon and Mr. Kishida pressured Mr. Li for Chinese help in tempering North Korea’s missile testing and otherwise hostile acts. Mr. Li did not address these concerns, except for, at one point, warning South Korea about “politicizing trade” (as if Beijing would never do such a thing). Mr. Kishida noted China’s recent military drills around Taiwan and reminded Mr. Li how “extremely important” any activities across the Taiwan Strait are to Japan and the international community. He may have reminded Mr. Li that Japan has committed itself to Taiwan’s defense even more directly than the United States. It became painfully apparent that the kinds of advances that Mr. Li sought could not proceed without some resolution of these and other security issues.
There is no doubt that such overtures would have been more productive if Beijing had been less high-handed about trade in the past, less demanding, and less willing to use trade as a weapon. For instance, during the pandemic, China cut off exports of critical materials. It also insisted that foreign firms operating in China share proprietary technology and trade secrets with Chinese partners. Additionally, Beijing cut off sales of rare earth elements to Japan to punish Tokyo over a diplomatic dispute. Now, to some extent, Beijing is paying the price for such behavior and is failing to get the engagement it wants.
