54 China The EconomistNovember 16th 2019
T
here weremoments during a recent gathering of Americans,
Chinese and Europeans, invited to Stockholm to discuss Chi-
na’s rise and the new world order, when Chaguan wondered
whether anyone would say anything cheerful. At last, halfway
through two days of doomy talk about trade wars and some
scratchy exchanges about whether Westerners have a right to criti-
cise China’s leaders, a Chinese participant sounded an optimistic
note. Brexit is an opportunity for China, he enthused—once out of
the European Union, Britain will need all the friends it can get.
That was as upbeat as discussions got at the Stockholm China
Forum, a semi-annual meeting for politicians, officials, ambassa-
dors, business bosses, scholars and journalists hosted by Sweden’s
foreign ministry and the German Marshall Fund, a think-tank. The
forum was founded to bridge transatlantic differences over China
policy after a crisis in 2004, when France enraged America by pro-
posing to lift an euarms embargo on China imposed after the
crushing of the Tiananmen Square protests in 1989. Chaguan has
joined the meetings since 2008 and has seen them turn testy be-
fore, despite endless supplies of good coffee and Swedish cinna-
mon buns. At a forum in 2018 Americans and Europeans sparred
over President Donald Trump’s foreign policy. This time was dif-
ferent. A shared fatalism marked panel discussions and offstage
conversations. There was a common conviction that China is not
about to change its model of authoritarian state capitalism.
A consensus has been building for a while in the West that Chi-
na is determined to rise on its own disruptive terms. Yet now this
gloomy view seems entrenched. It is testing longstanding beliefs
about globalisation and the benefits of openness. Interdepen-
dence used to be seen as a way to avoid conflict, but now it is clear
that it can make our countries vulnerable, a European lamented.
Much talk in Stockholm was of Mr Trump’s tariff war, and specula-
tion that it might end with China buying its way to a truce, perhaps
by purchasing shiploads of soyabeans from farm states vital to Mr
Trump’s re-election. There was cynicism about what that would
mean. Some feared that it would allow China to get away with ig-
noring American demands for structural changes to China’s econ-
omy. Americans and Europeans share many concerns about Chi-
na’s version of state capitalism, which requires foreign firms tobuy access to Chinese markets by handing over technology to local
rivals and sensitive data to the government, and—as American
basketballers just learned—to adopt China’s line on Hong Kong,
Taiwan and other nationalist shibboleths.
Interviewed on the forum’s sidelines, a senior Trump adminis-
tration official insisted that trade negotiators were still focused on
making China mend its ways. But the official argued that failure to
achieve that would prove America’s point about the limits of en-
gagement with China’s leadership: “Assuming that China digs its
heels in and refuses to do any structural reforms, the entire world
will be more aware of China’s strategy and behaviour.”
Chinese participants insisted that their country was also seek-
ing a negotiated end to the trade conflict, but also that it had grown
to depend too much on American markets, technology and even
education. “Decoupling is the intention of both countries,” said
one. Another urged Europeans to remember their countries’ ambi-
tions for strategic autonomy and to reflect on their disagreements
with America, a country gripped by a “cold-war mindset”.
Europeans shrugged off that unsubtle attempt to sow divisions.
Still, participants saw differences between America, which dreads
China’s growing power—including its military and political
clout—and Europe, which mostly worries about China’s economic
impact. Trump officials would like American firms and allies to do
less: notably meaning less trade with China in sensitive technol-
ogies. Europeans hope to manage relations by doing more. That
means at once more trade with China—on November 11th British
ministers cheered a decision by a Chinese firm to buy British Steel,
an ailing industrial concern—but at the same time more business
with other markets, as a form of hedging against China-related
risks. Europeans also want to do more to keep important indus-
tries alive at home. In January this year the German Federation of
Industry warned against “excessive dependence” on the Chinese
market. That reflects alarm among corporate chieftains at the po-
litical price of doing business in and with China, and at how much
that cost might rise. European countries are more willing than be-
fore to screen Chinese investments or academic exchanges for na-
tional-security risks. That is true even of free-trade champions like
Sweden, which used to worry that calls for reciprocity with China
were code for protectionism.To compete with China, do not copy China
Grizzled veterans in Stockholm were realistic about the limits of
Western unity and bravery in the face of China. At least the West
should avoid self-harming policies, they agreed. Americans and
Europeans warned against pouring public funds into domestic
firms to match the subsidies that China’s companies enjoy. China
would win that race, they said. It would be better to enforce rules
against market-distorting subsidies for any firms, foreign or do-
mestic. If Western governments must choose sectors to favour,
they should help by investing in research, education or infrastruc-
ture, and by welcoming skilled immigrants.
Long ago at these gatherings Western speakers urged China,
too, to be smart. They would craft clever ways to explain why liber-
al economic and even political reforms would be in China’s own
interests. Not this time. A reform-minded Chinese speaker said his
country was “too big, too old and too conservative” to adopt a dif-
ferent model. Some of the Westerners dared to suggest that auto-
cratic statism might harm China in the long term. Chinese coun-
terparts scolded them for “cultural arrogance”. Talking is better
than fighting, but it can still feel pretty bleak. 7Chaguan A great unravelling begins
China is not about to change its illiberal ways. The West must decide what to do about that