Chinese Leaders View US-China Rivalry as ‘biggest Uncertainty’

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(Bloomberg) — Chinese executives and investors are looking forward to a future filled with geopolitical tensions and slowing economic growth, but also with opportunities arising from the country’s burst housing bubble.

That mix of fear and measured optimism was on display at a forum at Harvard University where business tycoons, entrepreneurs and venture capitalists met with academics and students over the weekend.

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Participants said the ongoing slowdown in the real estate market weighed on investor sentiment. But they also praised China’s economic resilience, built on its vast pool of engineers and skilled workers, sophisticated infrastructure and innovation in areas such as renewable energy and electric vehicles.

However, the bulk of the discussion inevitably revolved around U.S.-China relations.

Xing Lu, an executive at Cloopen Group, a cloud-based communications services provider, said he was concerned that a potential U.S. shutdown of TikTok could hurt some of its investments that rely heavily on the social media giant to bring in new customers attracts.

In a thinly veiled complaint that the U.S. has punished Chinese electric vehicle makers with tariffs and other restrictions, Nio Chief Executive William Li called for more cooperation and said the Chinese government has failed to discriminate against foreign automakers.

“Geopolitics is the biggest uncertainty,” Chen Dongsheng, chairman and CEO of Taikang Insurance Group, said at Harvard College’s China Forum. “The trend of globalization has turned into decoupling, technology blockade and trade protectionism.”

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Graham Allison, a Harvard professor who met with President Xi Jinping and other senior leaders during a recent trip to Beijing, said he returned with both good and bad news. Allison popularized the term “Thucydides Trap,” which describes the historical tendency toward war when a rising power threatens to displace the existing superpower.

The good news, he said, was that the meeting between Xi and US President Joe Biden in San Francisco in November put a stop to deteriorating relations and laid the groundwork for improvement. However, it is by no means guaranteed that the two countries can compete and cooperate at the same time, he said.

Despite economic challenges at home, Xi has “great power” and “a determined vision to make China all it can be,” Allison said.

“So bad news: This is a real Thucydides rivalry between the fastest-growing power of all time and the most colossal ruling power since at least Rome,” Allison said. “And none of us are willing to give much in terms of our position.”

The potential collision comes as China’s economy struggles with a housing crisis and a loss of confidence among consumers and entrepreneurs as Beijing increases its focus on national security. Chinese stocks have plunged 30% in the past three years as foreign investors retreated.

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James Ding, managing director of GSR Ventures, said whether foreign investors will be excited about the Chinese market again depends on “the direction of Beijing’s next policy actions.”

“The Chinese government is committed to reviving the confidence of Chinese and foreign investors and the private sector,” Ding said. “I hope it gradually improves.”

Other Chinese venture capital and private equity investors were relatively optimistic.

As China’s economy faces a shrinking population and geopolitical risks, China is producing millions of college graduates, engineers and other skilled workers and enjoying competitive advantages through a comprehensive supply chain and a renewed focus on innovation, said Kevin Qi, chairman of Merger China Group.

“I have more positive arguments for China than negative ones,” Qi said.

Jing Hong, founding partner and CEO of Gaucheness Capital, shared this sentiment. She said she is optimistic about Chinese assets as well as foreign startups by Chinese entrepreneurs.

The structural shift from a labor- and capital-intensive economy means China must push for technological innovation to improve productivity, bringing with it “a huge opportunity,” she said. She added that China’s stable social and political structure suggests more sustainable development than most of its competitors.

“Many people see how China has slowed down significantly, but they underestimate how stable the society is,” Hong said. “Ultimately, it’s not about how much GDP can grow. It’s about which country can protect the bottom half of the population. China did pretty well there.”

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