Western Investment Into China 2022: Where Politics And Businesses Diverge Their Opinions

Op-Ed Commentary by Chris Devonshire-Ellis – July 25th, 2022

The first half of 2022 has been interesting to say the least, although in terms of the ability to finally travel, things have been looking up. That means, as an Asian based business, some of our fortunate, previously locked-down Dezan Shira & Associates executives have been able to travel from China and Asia to Europe, with multiple meetings, discussions, and analysis taking place throughout the EU as we seek to learn as much as possible about attitudes towards the Asian region.

What has occurred? Large apparent Asian knowledge gaps, coupled with increased China tensions. What does this mean? Let’s take a look at our findings:

Attitudes towards China 2022

The big word in use this year to date is ‘security’ – with Western politicians all talking up the China threat. More recently, this has included an expectation that China will invade Taiwan, apparently based on the premise that current Premier Xi Jinping has previously stated that his legacy will be the reunification of mainland China with the island, and that the 20th China National Congress takes place in November where he is expected to outline how this will be achieved. Cue the activities of ‘The Quad’ grouping, huge increases in US arms sales and a proposed upcoming visit to Taiwan by US House Speaker Nancy Pelosi, just to make sure that Beijing is as pissed off as it can possibly be. Taiwan is apparently a ‘democratic beacon’ shining a ‘Western values’ light towards China, although I have to say I didn’t see it much from Xiamen last time I visited, where specific brothels cater for visiting businessmen from Taipei, an unexpected method of ‘fucking the Chinese.’

As for democracy, Taiwanese politics always has been about as democratically mad as a box of frogs trying to escape a marauding Burmese Python on the advance for lunch. I think they should just give it back, appoint a Governor and then everyone can just get back to playing mahjong. It’s basically what happened with Hong Kong, where despite all the negative rhetoric, according to the IMF, the per capita GDP level was US$49,036 last year whereas in Taiwan it was US$33,775. That means every single one of the 22.86 million Taiwanese paid over US$15,261 last year to have the right to vote. As elections are held every four years, that’s a whopping US$61,044 difference over Hong Kong just to vote for someone who is probably corrupt anyway. Good luck with that.

Anyway, the West is big on the China security threat on Taiwan, and in London, almost petrified over Beijing’s ambitions. War is good for the United States though, although it hasn’t been recently for Ukraine, Afghanistan, Syria, Ethiopia, Yemen, Iraq, or Libya. We however think that Xi Jinping has no intention of invading Taiwan at all, such actions being designed to talk nationalism on the mainland, and if actioned, would result in an immense and intense conflict and do immense damage to the Chinese economy. Chinese citizens are not used to seeing images of their soldiers’ returning homes in body bags, where the United States is. The US imagination of a Chinese invasion of Taiwan is accordingly much easier to conjure. But with politicians never the best equipped for longer term views, security problems with China and the ramping up of Taiwan rhetoric is the order of the day. Bad, bad, bad China, the most serious threat the West has to face.

Except of course, that successful businesses are generally not run by Western politicians, as any trawl through nearly every nationalised business in Europe will tell you. Instead, they are run by rather more pragmatic individuals who have their income and those of their employees to protect, in addition to the expectations of their shareholders to meet. Generally, this means money, and if available, a trip to a Xiamen brothel as well, especially if from Taiwan, usually booked under the wife-defeating code of ‘Golf trip’. (Yes, this happens in the West too. Has anyone actually published a book on modern ‘Western Values’ or updated them since the Ten Commandments?)

Anyway, the bosses of such businesses have a motivation to make money. (Their Governments should too, as they depend upon the fiscal income to keep their countries operating from the taxes extracted from fiscal revenues, although the Rajapaksa’s of Sri Lanka, another democracy, did rather more of the extraction on a personal level. It was obviously more efficient).

This need to profit has manifested itself by wanting to invest and set up manufacturing and sales businesses in fast-growing economies with large, expanding middle class consumer base. In other words, China, although there are others as well. This is why, at my firm, we have seen investment into China increase in H1 2022, from precisely the Western countries whose Governments all say it is a security risk. Clearly, this is dependent upon what one wishes to sell. China has a significant middle-class population that is expected to reach 1 billion in numbers by 2030.

In fact, this represents a security risk in terms of not generating fiscal revenues by not selling to China, as many businesspeople realize. This means a significant gap is opening between the West’s politicians and the West’s business community as concerns China. Fortunately, one can vote the politicians out of office. There will be a lot of blood on the floor in 2023/24 as the pendulum swings once again back to doing business, as opposed to winding entire nations up so much they must buy weapons.

The actual reality for China is that Western foreign investment continues to increase – they all want a slice of that 1 billion consumer pie. The politicians meanwhile can jump up and down all they want. Not everyone is listening.

China Plus Three Or Four

But there is another side to this – alternatives to China. For many Western businesses this makes complete sense, if only to diversify supply chains. That, we note, has developed from being not just ‘China Plus One’ – a strategy now over a decade old – but to ‘China Plus Three Or Four’ – a situation entirely brought about by the shifting supply chains in the wake of the Ukraine conflict. That can even mean shifting supply chains to different continents, with North Africa, the Caucasus, the Middle East, Central Asia and elsewhere in South Asia all being evaluated, and that’s just from Europe. It’s an issue we discuss a lot over on our Silk Road Briefing platform.

What is surprising though is that numerous EU countries, while they may have a ‘China Policy’ don’t have an ASEAN or India Policy. These are the primary ‘China Plus Three Or Four’ destinations they ought to be looking at and are more than adequately covered in our ASEAN and India Briefing websites too.

Our various trips to Europe therefore conclude that while politically China is dismissed as a security threat, European investors continue to look at and invest in the country, and especially as a consumer market. We have seen this firsthand; our H1 2022 China investment revenues are way up – we service these exact types of clients.

What we’ve also noticed is that although some education in Europe is lacking, there is growing interest in ASEAN and India too – again our revenues are up this year in these markets. The message then is clear – Taiwan doesn’t really matter, is unlikely to develop into anything serious in terms of military escalation, and Asia remains and will continue to remain the place to be. Meanwhile, the seafood in Xiamen this time of year is amazing, while enjoying China 2022 expected GDP growth rates of 5.5%. In the EU meanwhile, the talk is of recession. It’s not a hard choice to make when being responsible for a business. And one can wave at democratic values in Taiwan from there.


Any views or opinions represented in this blog are personal commentary, belong solely to the contributor and do not necessarily represent the views of Asia Briefing Limited or Dezan Shira & Associates.

Back to News

Back to top