A former insider on what’s happening in China

A former insider on what's happening in China

Desmond Shum was one of the best-connected businessmen in China. He and his ex-wife, Duan Weihong, used their connections to top government officials to build a billion-dollar property development company during the mid-1990s, a golden age for entrepreneurs.

Now, tensions with the West dominate the discussion, with Treasury Secretary Janet Yellen sharply criticizing China’s treatment of American companies on a visit to Beijing this week.

Mr Shum left China in 2015 as the country’s leader, Xi Jinping, asserted greater state control over the country and its businesses. Duane, also known as Whitney, disappeared two years later. (It is believed that Communist Party officials detained him After a high-ranking political aide was arrested on suspicion of corruption.)

Mr. Shum tells the story of his rise and fall — and the murky reality of doing business in China — in his 2021 memoir. Many details cannot be independently verified but his role at the intersection of business and politics is certain. He now lives in the UK with the couple’s son (neither of whom has seen Duan since his disappearance) and says it is unsafe for him to travel to China.

Mr. Shum will testify next week Congress About the challenges for American businesses operating in China. This conversation has been condensed and edited for clarity.

What has changed since your book was published?

First, the perception towards China has become more negative. Kovid has contributed a lot in this, especially the change in the thoughts of the general public. This has helped policymakers accelerate the way they deal with China – now they have the chance to move forward.

Second, the outside world underestimates how badly the Chinese economy is deteriorating. Several things have surprised me in my conversations with business people in China. A large dairy company is producing more milk powder because people are buying less milk. Usually it’s one of the last things you’ll cut.

Many executives also say that since the pandemic, employees have been openly looting and stealing from companies. Why? They have lost hope as the economic scenario is very bad.

What is its impact on governance and business?

This adds to the growing insecurity of the Chinese Communist Party, so the government is tightening controls using measures introduced during the pandemic. This is hurting business: Due diligence firms with western ties raided and access restricted AirA Chinese data provider, part of an effort to control foreigners.

How are international companies adjusting?

Companies are reducing their exposure in a big way. People talk about “globalization”, but the proper term is “re-globalization except China”. You won’t have a country to replace China, but operations are expanding to Vietnam, Indonesia, Sri Lanka, India and elsewhere. Look at how many Taiwanese manufacturers are moving to Mexico in a big way. And then you have friendshoring and nearshoring in Europe.

Is America’s messaging – talking tough while also saying it wants to keep talking – complicating matters?

After four years of Trump and three years of Biden, you see a general stability on China policy. A slight change or variation in tone will not affect China’s perception that the US view of it is set. They need some easing of tensions to revive business confidence and bring in more capital. If they can reduce or delay the US measures, they want to do so.

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