[Beijing Diary] Is the Separation of Politics and Business in China a Myth?

"Will it really happen again this time? I hope that the same thing as before will no longer occur."

Mr. A, a businessman who has been engaged in trade in China for nearly 20 years, recently expressed skepticism about China's foreign investment attraction policies. Despite persistent meetings with city government officials urging him to "invest more actively," he cannot easily forget the economic retaliation following the deployment of the Terminal High Altitude Area Defense (THAAD) system in 2016. Watching acquaintances gradually close their businesses and move to Southeast Asia, he endured with the hope that "things will get better someday."

[Image source=Yonhap News]

The city where Mr. A resides is one of the representative international trade cities. Although not widely known, it maintained a friendly attitude even during the zero-COVID prevention period by issuing business visas normally. With this level of sincerity, there is great hope that business opportunities may return now that the Chinese economy is reviving. A source who requested anonymity said, "Chinese government officials have openly indicated their intention to separate politics and economics," adding, "Especially by granting more autonomy to local governments, there is a somewhat tolerant atmosphere toward policies different from those of the Communist Party."

However, recently, ominous rumors have been circulating among Korean businesspeople. It is said that on the 25th, China's General Administration of Customs, equivalent to Korea's Customs Service, issued instructions to regional customs offices to strengthen inspections of cargo imported from Korea. However, the Korean Ministry of Foreign Affairs and the embassy in China have practically denied this, stating, "No unusual developments related to customs clearance have been identified." The source of the rumor is known to be a network for information exchange among Korean entrepreneurs in China. For businessmen like Mr. A, who are waiting for opportunities, and companies that have already made large-scale investments, this is a chilling story.

Regardless of the truth, it cannot be denied that relations between the two countries have recently cooled rapidly. Following President Yoon Suk-yeol's mention of the Taiwan issue in a foreign media interview, where he opposed "changes to the status quo by force," on the 26th (local time), after a summit with U.S. President Joe Biden in Washington, D.C., it was stated that "the two leaders reaffirmed the importance of maintaining peace and stability in the Taiwan Strait as an essential element of regional security and prosperity." Subsequently, China responded with heightened rhetoric such as "No interference allowed" and "Playing with fire will lead to burning."

Considering the timing, it is not unlikely that China will choose to separate politics and economics, adopting a dual approach of diplomatic response and economic policy. Although the economy has recovered beyond 2019 levels, the first quarter economic growth rate (4.5%) fell short of the annual target (around 5.0%). This means that relying solely on domestic demand cannot restore the economy to its desired trajectory within the expected timeframe. If China's economic policies, which have taken a path different from the general international trend, become swayed by political issues and emotions, no country will pay attention to China's slogans of "opening up" and "attracting investment" in the future. In the market, the worst scenario is not a "certain negative factor" but "uncertainty."

This content was produced with the assistance of AI translation services.