(Easter eggs hidden Inside)China's new "ping pong diplomacy": New wisdom in handling China-US relations
Cold Politics, Red Carpet: Decoding Multinational Visits to Beijing
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Let's start the main content
A previous article revealed some details of Musk's visit to China and possible business signals. But today's content, in addition to Musk, Apple CEO Cook and others visiting China recently, reflects some changes in China's handling of China-US relations. If you have had the fortune to read the book "On China" mentioned above, I believe you will have more feelings about today's content.
First of all, Musk's visit to China this time was so sudden and unexpected that the capital market has not yet fully judged its significance: over the past week, Tesla's stock price has risen sharply, but the situation in Hong Kong and Chinese concept stocks is quite complicated (overall falling first and then rising).
The current consensus in the market is: Musk's visit to China must be beneficial to Tesla. This does not need to be analyzed to know. However, the impact on the domestic economy, geopolitical landscape and other macro aspects is still very difficult to estimate. In the next few days, China's investment bank economists and self-media are working hard to digest the press releases of this visit, trying to find the metaphor behind it. However, I have some straightforward views to share with you:
1. Musk's visit to China is an attempt by China to achieve a "political cold and economic heat" situation (that is, cautious official diplomacy but very lively economic exchanges at the grassroots level) under the complicated China-US relations. Such efforts will continue, but the effect remains to be evaluated.
2. Musk and Tim Cook, who visited China earlier, are the foreign entrepreneurs who can best demonstrate "China's irreplaceability in the global industrial chain", but their companies' positions in China are also somewhat subtle; whether this subtlety can be resolved depends on the wisdom of the parties involved.
Let's talk about the first one first. Undoubtedly, China-US relations are the most important bilateral relations in the world. Regrettably, since February this year, mutual trust between the two sides has been repeatedly damaged. As China and the US do not see eye to eye on many major international issues, restoring mutual trust is by no means easy. It is unrealistic to expect either side to make major concessions unilaterally. In this case, "retreating for the secondary" is not a bad strategy: If Blinken or Yellen cannot come to China for the time being, at least Cook and Musk can come.
In fact, at the same time as Musk's visit to China, JPMorgan Chase CEO Jamie Dimon was attending the JPMorgan China Investment Summit in Shanghai. CEOs of many multinational companies such as Starbucks and Pfizer also attended the meeting. I believe that in addition to attending the summit, they must have had other intensive schedules. In short, China hopes to create a "political cold and economic heat" situation in China-US relations. Such a situation has appeared before in China's relations with the US, Japan and the EU.
Because the United States is a country dominated by a free market economy, within the premise of complying with the law, enterprises have enormous discretion. If they consider China important enough, they can also exert influence on their own country's policies in return. Based on past experience, "political cold and economic heat" is just a means. The ultimate goal is still to return to the pattern of "political and economic warmth" - just like the ping pong diplomacy created by Chairman Mao Zedong and Presidents Carter and Nixon, "small balls push big balls."
We should not overestimate the significance of entrepreneurs' visits to China. After all, they will only stay in China for 48-72 hours. The CEOs of these multinational companies are used to crossing time zones all year round. A visit is nothing. You know, after his last visit to China, Cook went to India almost immediately!
However, Musk's visit to China this time did receive significantly higher reception specifications and more obvious official color. This may indicate that a lot has happened in just over a month from Cook's visit to China to Musk's visit to China. In any case, current international relations are quite complicated, which is why the Hong Kong and Chinese concept stock markets (even including China's A-share market) are full of doubts and entanglements.
If Musk publishes a detailed summary statement in his personal capacity after the end of his visit, we will know a little more. Regrettably, I don't think this will happen - although many people think Musk is a low EQ, straightforward tech nerd, that's just his image. He is actually very shrewd and will only make choices that are most beneficial to himself. He will only make statements in public that offend no one and follow the rules, and is unlikely to provide any useful information.
Let's talk about the second point. Apple's Cook and Tesla's Musk are the most attention-grabbing multinational entrepreneurs to visit China recently, and they received the highest level of reception (Musk higher). The logic behind this is not difficult to understand:
• Their companies have the highest dependence on China's supply chain and are most reluctant to see "decoupling";
• Their companies also take China as an important market, or even the largest overseas market. So they are more willing to see a prosperous, fast-growing China.
Some radical groups in the United States may not think so. Cases like Roe v. Wade may continue to disturb the thinking of the political elite. MAGA groups may still hope to further sanction China. But for real decision makers and entrepreneurs, national and corporate interests must be absolutely above ideology.
In contrast, JPMorgan Chase, Starbucks, Pfizer, etc. either do not rely on China in both aspects at the same time, or their dependence on China is relatively shallow.
The breakthrough of "political cold and economic heat" can only be companies like Apple and Tesla.
Don't forget that on the same day as Musk's visit to China, US Trade Representative Tai claimed that "very concerned about the plight of US companies in China" - as long as China takes good care of Musk, it can to some extent counter such claims.
It is interesting that the positions of Apple and Tesla in the Chinese market seem to have become subtle in recent years. They are still the strongest in their respective fields, but the efforts of domestic brands to catch up have not stopped, and competition between them is becoming increasingly fierce and beyond the normal scope of market competition. Specifically, Apple blocked the rise of domestic mobile phone brands such as Huawei, Xiaomi, OPPO and vivo; Tesla poses obstacles to domestic automakers such as BYD, Li Auto, Xpeng Motors, etc. Some consumers and media loudly protest that Huawei's sanctions may be related to Apple's mischief, and Tesla's sharp price cut is clearly aimed at new domestic automakers - whether this is true or not, many people think so.
In some people's view, the best scenario is: let Apple and Tesla continue to bring more demand to China's manufacturing industry, but let them earn less money from the Chinese market. Regrettably, this is unlikely to happen. Because a large part of the products manufactured by Apple and Tesla using the Chinese industrial chain are originally intended for sale in China. China's performance also significantly affects their financial performance and stock prices, thereby indirectly affecting their ability to expand production in China.
This brings up an even more thought-provoking question: the importance of Apple and Tesla (and some other multinational companies) to China's supply chain, and the competitive relationship between them and domestic brands, which is more important? Will the latter affect the former, and will the former play a role in the latter? This question is more subtle for Tesla, because Tesla has factories directly in China, unlike Apple, which produces in China through partners like Foxconn. I believe Musk's visit to China this time may have explored this issue, we just don't know the details of the discussion yet.
In short, Musk's sudden visit to China is neither the beginning nor the end of the "political cold and economic heat" pattern between China and the US. Strictly speaking, we have not really entered the "political cold and economic heat" stage, we just have such a vision. After Cook, Musk and Jamie Dimon, there will definitely be more CEOs of multinational companies of similar scale visiting China - if NVIDIA's Jensen Huang or Microsoft's Satya Nadella appear in Beijing and Shanghai within a month, I would not feel strange at all. However, we must clearly recognize that for these CEOs, taking a trip to any country including China and staying for two or three days is not a difficult thing. The real challenge is whether they are willing to re-examine their views on the Chinese market and supply chain after returning to the US, and even in turn influence the major policies of their own country.
It needs to be emphasized that attracting visits by multinational CEOs and demonstrating China's position in the international supply chain is an important direction for promoting sustained economic recovery, but not the only direction. For example, the recovery of domestic demand, the recovery of real estate and other fixed asset investment, local finance, aging and other issues may be more complex than the problems faced by export-oriented manufacturing. If China-US, China-Europe and other foreign relations can be handled well, of course many problems can be solved. But if all the problems in economic operation are attributed to foreign relations issues, that would also be overly simplistic and naive.
In summary, I am not optimistic that China-US relations will have major breakthroughs in the short term. But as long as both sides realize each other's importance and deepen economic ties, there is still much room for reconciliation in the long run. Of course, this depends on the wisdom and determination of decision makers on both sides - and this is also one of the reasons why readers of "On China" will have feelings about the above content.