Yan Xuetong Warns Chinese Businesses That Deglobalisation is Here to Stay

According to Yan, US-China relations are in a worse state today than they were in 1978 before diplomatic relations were established.

Dear Everyone,

One of China’s most renowned international relations scholars, Yan Xuetong (阎学通), recently delivered a speech at an event hosted by China’s Cornerstone Capital (基石资本) in Shenzhen. Addressing an audience made up mainly, I assume, of Chinese entrepreneurs and investors, Yan discusses the general decline of the world we are living in marked by an increasingly fraught US-China relationship, the bipolarisation of the current international order and a trend towards deglobalisation. His main message to his audience was that Chinese firms should review their long-term strategies and no longer rely so much on international cooperation and the effects of globalisation to grow their businesses. This generally regressive and adverse environment will last for another one-to-two decades or longer, he says.

THE SPEAKER

Name: Yan Xuetong (阎学通)
Age: 70
Position: Director of the Institute of International Relations, Tsinghua University.
Previously: Researcher at China Institutes of Contemporary International Relations (CICIR) from 1982-1984 and from 1992-2000.
Research focus: International relations
Education: BA Heilongjiang University (1982); MA University of International Relations (1986); PhD University of California, Berkeley (1992)
For a more detailed overview of Yan’s rich career, interests, awards and publications, see here.

KEY POINTS

1. We are now living in a bipolar, not a multipolar, world.

• “Political correctness” is the main reason why politicians from across the world won’t admit to this.

  • The US won’t acknowledge this because it would be akin to saying that China is already on a par with it.

  • China won’t admit it, because it cannot portray itself as more important than other countries.

  • And other potential poles such as Europe, Russia, India, Japan and Brazil talk about multipolarity so as to enhance their own status and not be seen as inferior to the US and China.

  • Comment: This has long been a theme pursued by Yan. In 2013, he predicted that US-China bipolarity would be the distinguishing feature of today’s world.

2. US-China rivalry and the US’s attempts to contain China’s rise are here to last

• US-PRC relations are in a worse state today than they were in 1978 before diplomatic relations were established (我们看现在中美之间的关系，都不如1978年没有建交前).

  • Yan: “I am now in my 70s and when we were children in the 50s and 60s we grew up cursing US leaders. Since Nixon's visit to China in '72, China stopped naming and shaming the American leadership. [However,] after Trump came to power, we resumed naming and shaming them, calling Pompeo an enemy of mankind. How far [down] do you want bilateral relations to go? During my most recent visit to the US, I felt that the perception of China in America had also seriously deteriorated. I met some of our overseas students who told me that American students would not say it out loud, but that everyone knows that they harbour a lot of hostility towards Chinese students.”

• Yan repeated recent comments made by former Singapore PM Goh Chok Tong’s that we are entering a world marked by US-China competition and distrust, growing economic and political divisions, and countries “passively” choosing a side [被动选边站] between Washington and Beijing.

  • Driven by Washington’s recent Indo-Pacific Economic Framework for Prosperity (IPEF), the previous “strategic balance” (战略平衡) consisting of economic reliance on China and security reliance on the US by countries in the region has begun to tilt in favour of the US.

• Businesses must therefore prepare themselves both to survive and develop in such an adverse and regressive environment for a long time to come.

  • Yan: “That is to say, your past strategy of developing in the context of a globalising world and [thus] relying on international cooperation to develop your businesses may no longer be appropriate.”

  • Companies must therefore start seeking opportunities generated not by international cooperation but by the effects of decoupling and the remodelling of supply chains.

3. On the US-China tech race

• US-China rivalry differs from Washington’s rivalry with Moscow during the Cold War. The latter was focused on achieving dominance in what Yan calls “natural space” (自然空间 – i.e. land, sea, sky and space), whereas the former is primarily focused on cyberspace (网络空间).

  • Yan: “In other words, whoever has the upper hand in cyberspace will win this strategic competition.”

• Washington now attaches more importance to its tech rivalry with China than it does to ideology.

4. On the hypocrisy of the US’s new state-driven approach to tech

• The US has repeatedly condemned and filed WTO complaints against China for its use of state subsidies and market distortions. Yet Washington is now doing exactly that.

• Its willingness to violate its very own market-economy-based principles of free trade and free competition is a clear indication of just how determined it is to hinder China's technological rise.

5. China’s dual circulation strategy: Focusing on the internal (domestic) circulation

• In the face of growing political tensions, sluggish global growth and the Wests’s de-risking of its supply chains, China is intent on increasing its degree of self-reliance and thereby reducing its dependence on the outside world in certain areas.

• The current trend towards deglobalisation will last for another 10-20 years or more.

• But this negative trend encompasses a lot more than simple economics. The world, its civilisations and politics have entered into a period of general “regression” (倒退) and the risk of armed conflicts is increasing.

• This regressive and adverse environment is precisely what Beijing was highlighting when it stated that:

  • “Today, our world, our times and history are changing in ways like never before, and the international community is confronted with multiple risks and challenges rarely seen before. Regional security hotspots keep flaring up, local conflicts and turbulence occur frequently, the COVID-19 pandemic persists, unilateralism and protectionism have risen significantly, and traditional and non-traditional security threats are entwined. The deficits in peace, development, security and governance are growing, and the world is once again at a crossroads in history.” (As Yan points out, the term “crossroads” (十字路口) has a negative connotation in Chinese and does not portend anything good).

• Chinese companies must wake up to the fact that 'deglobalisation' has become the norm (“逆全球化”已成常态).

6. Understanding the drivers behind this de-globalising trend

• Globalisation, the digital economy and extreme forms of economic liberalism have led to a massive wealth disparity both within and among countries.

• People’s disgust with and opposition to globalisation have helped bring about the rise to power of populists who legitimise their deglobalising policies by constantly invoking the vaguest and most malleable of all concepts: economic security. Once several governments start going down this route, deglobalisation becomes a trend.

• Thus, if one is to address this wave of deglobalisation, one should look towards governments and their policies first.

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