A remarkable realisation is dawning in the business community: China, long regarded as an unsurpassed market opportunity, may be a gamble too far. In a survey, the insurance broker WTW finds near unanimity among bosses that China is a risk. They would do well to leave before the risk turns calamitous.
In 2020, after Australia called for an investigation into the origins of Covid-19, Beijing imposed draconian tariffs on Australian wine. A year later, Australia’s wine exports to their biggest foreign market had plummeted by 96 per cent. Last year, after Lithuania invited Taiwan to open an office bearing its name, goods containing Lithuanian components mysteriously got stuck at Chinese ports.
Such incidents seem to have convinced global businesses, so long enamoured with China’s possibilities, that the country is now a hazard. This year’s WTW political risk report, published on Wednesday, finds that 95 per cent of businesses consider Asia-Pacific — in reality China — a risk. That’s up from 62 per cent two years ago. Only 44 per cent consider the Middle East a risk; 63 per cent think Europe, which includes Russia, is a risk. (The survey was conducted as Russian troops massed at the Ukrainian border but before the invasion.)
“It’s remarkable that companies were more concerned about China than Russia,” Sam Wilkin, WTW’s director of political risk analytics, told me. “The conflict in Ukraine has shown how easy it would be for China and the West to get on opposite sides of an intensely emotive geopolitical issue, and that’s the scenario that a lot of companies we talked to were worried about.”
Companies are already drawing conclusions. In WTW’s survey, China tops the list of countries where companies have cut or avoided investment. In 2020, the top-ranked country was Iran. LinkedIn and Yahoo recently left China altogether.
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Companies will keep doing business in China. Many will chase another year of profit and hope for the best. Chief executives labour under the yoke of quarterly reports. Yes, pulling out would mean big losses but also peace of mind in the long run. Depending on China for corporate success is unsustainable when it and the West are on a collision course and Beijing is not afraid to harm western companies as proxies for their governments.
Elisabeth Braw is senior fellow at the American Enterprise Institute
