Risk management is the new buzz phrase echoing around the corridors of power in Beijing. At the end of a four-day study session, leading Communist Party cadres from across China were told of the “tough battle” ahead.
“Officials [must] go all out to do a good job of major risk prevention,” Wang Huning, the CCP’s ideology guru, said during Thursday’s closing address, according to the state-run Xinhua news agency.
“Bottom-line thinking [would be required] and [you] must prepare for the worst-case [scenario],” he added.
His comments at the ideological talkfest in Beijing reinforced Monday’s opening speech by President Xi Jinping about the dangers of “financial risks” and the fall-out from the trade war with the United States.
Talks are due to resume in Washington next week when Vice-Premier Liu He travels to meet US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer on January 30-31.
But the prospects of an all-encompassing agreement have receded after US Commerce Secretary Wilbur Ross stressed earlier this week that both sides were still “miles and miles” from reaching a deal.
Crucial sticking points revolve around intellectual property rights in the technology sector, cybersecurity and heavy state subsidies across a range of industries.
The “Made in China 2025” plan, which aims to turn the world’s second-largest economy into a major tech player, is another key issue.
“In the face of a turbulent international situation, a complex and sensitive environment, and the arduous task of reform … We must be highly vigilant,” Xi told the Party faithful, in a reference to rising tensions with US President Donald Trump’s administration.
Preparing officials for economic pain simply highlights the depth of the slowdown in growth and the effects of the vice-like tariffs on Chinese imports, worth US$250 billion, to the US.
Still, it is unlikely that Beijing will change its state-backed model or give ground when it comes to moving into advanced technologies, such as artificial intelligence, or AI, robotics, 5 and even 6G networks, as well as the Internet of Things and the factories of the future.
Xi has made that clear in numerous speeches and it was reiterated by Vice-President Wang Qishan at the World Economic Forum in the Swiss ski resort of Davos this week.
“It is imperative to respect national sovereignty and refrain from seeking technological hegemony, interfering in other countries’ domestic affairs, and conducting, shielding or protecting technology-enabled activities that undermine other countries’ national security,” Wang said in remarks which would have resonated in Washington.
“We need to respect the independent choices of the model of technology management and of public policies made by countries, and their right to participate in the global technological governance system as equals,” he added.
For trade war, read tech war. During the past year, this has been a bone of contention not only with the US but also with the European Union, the largest trading bloc in the world.
In December, Huawei became the latest Chinese telecom conglomerate to be targeted after domestic rival ZTE nearly folded in the summer.
The company was denied access to crucial US components for breaking a sanction-busting agreement relating to Iran and tottered on the brink of collapse before the ban was lifted.
As for Huawei, Meng Wanzhou, the chief financial officer and daughter of billionaire founder Ren Zhengfei, is now facing the prospect of being extradited to the US on similar charges of violating sanctions imposed on Iran after being arrested in Canada last month.
The flagship group of the “Made in China 2025” program has also been branded a cybersecurity risk because of perceived links to Beijing. Allegations which have been denied by Huawei.
Yet, James Andrew Lewis, a senior vice-president at the Center for Strategic and International Studies, fleshed out the problems from an American perspective when he wrote in early January that “China is a technological rival of a kind the US has never had before.”
“Technology transfer has been an issue since China’s opening in 1979,” he said. “The original US policies assumed bilateral cooperation. The US supplied military technology (such as Blackhawk helicopters and Copperhead guided artillery rounds) and allowed China to launch US commercial satellites.
“Security cooperation was based on the presence of a common opponent, the Soviet Union. Commercial cooperation was shaped by the belief that China would become a market democracy and that bilateral relations would be amicable. Whatever the soundness of these assumptions at the time, with the ascent of Xi Jinping they are no longer valid,” Lewis, who had previously worked at the Departments of State and Commerce, added on the Washington-based think tank’s website.
Other voices have been just as vocal.
George Soros, the billionaire philanthropist who built his fortune on Wall Street, delivered a scathing attack on Beijing’s policies at Davos on Thursday.
“Last year, I still believed that China ought to be more deeply embedded in the institutions of global governance but since then Xi Jinping’s behavior has changed my opinion,” he said.
“My present view is that instead of waging a trade war with practically the whole world, the US should focus on China. Instead of letting ZTE and Huawei off lightly, it needs to crack down on them. If these companies came to dominate the 5G market, they would present an unacceptable security risk for the rest of the world,” Soros added.
For the upper echelons of the CCP, the risk in risk management appears to have been dialed up a notch.