Expect more olive branches than punches from China in 2023

“Everybody has a plan until they get punched in the face,” heavyweight boxing champ Mike Tyson once said when asked if he was afraid of his competitor’s fight plan. He might also have been describing China’s attitude in the global ring.

Ever since China opened its economy under Deng Xiaoping, it has played the role of Tyson to the Davos crowd, answering well-articulated strategies and expectations with, well, punches in the face. China might subsequently try to make nice, but the cycle eventually repeats itself.

An early blow came with the 1989 Tiananmen Square crackdown, which put a definitive end to hopes for political liberalization in China. But economic liberalization continued as China joined the World Trade Organization. That set up a generation of moguls and think tankers to be blindsided by China’s blatant disregard for the rules. Another punch in the face.

Just last month, global health experts failed to duck when Beijing lifted its “zero COVID” policy with little warning and without consulting the World Health Organization.

I can’t say I predicted that last one either, but I know enough not to be surprised. After 20 years of doing business in China, I’ve come to expect geopolitical U-turns, about-faces on economic reforms, and zig-zags on high-tech policies. 

China experts cite Xi Jinping’s de facto dictatorship as the main factor propelling these often sudden and nonsensical edicts. In truth, knee-jerk decisions have been a Chinese calling card since long before Xi solidified his powerbase.

“Expect the unexpected.” This is what I tell businesses when they make their first foray into the Middle Kingdom. Here are a few cautionary examples:

In 2010, China swiftly cut off salmon imports from Norway after the Nobel Peace Prize went to human rights activist Liu Xiaobo, who at the time was in a Chinese prison. China had been Norway’s largest customer by nation.

Other countries have suffered similar fates: Australia for highlighting human rights violations in Xinjiang, Canada for the house arrest of Huawei’s CFO, and the Philippines for objecting to China’s territorial claims in the South China Sea.

CEOs of multinational corporations also have grown accustomed to sudden punches from China. To avoid them, they meet regularly with Chinese Communist Party officials so they can ask the essential question: “Are we serving the needs of the party?”

Foreign businesses know very well that they exist in China at the mercy of Beijing.  In one fell swoop, Xi could easily wipe billions of dollars of equity off the books of a company like Starbucks if, say, it were forced to close its 6,000-plus stores throughout the country. 

These fears are far from hypothetical, as the National Basketball Association (NBA) can attest. In 2019, Houston Rockets General Manager Daryl Morey tweeted his support for Hong Kong’s democracy movement. The backlash was immediate; Chinese television networks stopped airing NBA games, and Chinese brands suspended ties with the Rockets. It’s estimated that the NBA lost more than $400 million over one tweet. 

Just as quickly as China punches, however, it might extend an olive branch, casting blame aside and letting bygones be bygones. We saw this late last year as China awakened from “zero COVID” and sought to reveal a softer, more amicable tone to the world.

For example, the foreign ministers of Australia and China met in Beijing last December to repair political and economic ties. At around the same time, Xi met with Philippine President Ferdinand Marcos Jr., agreeing to resolve their differences through “friendly consultation.”

China also rediscovered its taste for Norwegian trade last year as salmon imports increased more than 45 percent year over year in the first half of 2022. As for the NBA, after a 28-month blackout, Chinese state broadcaster CCTV started airing games again, granting the NBA a sigh of relief over its $5 billion interest in the Chinese market.

Expect China to hand out more olive branches in 2023 as it abandons its “wolf warrior” tactics for a softer, more empathetic approach. 

Even against the backdrop of Japan’s largest military buildup since the second world war, Beijing has invited Japan foreign minister Yoshimasa Hayashi to China to work towards “constructive and stable relations.” This first visit of a Japanese foreign minister since 2019 should reduce heightened tensions over the disputed islands in the East China Sea, clarify Japan’s stance on Biden’s chip sanctions against China, and further strengthen an already robust trade relationship.

It’s also clear that China wants to repair its rocky relationship with the U.S. Refraining from its usual “tit for tat” strategy, China has decided to look the other way as the U.S. intensified its high-tech embargo on Beijing, black-listed more military-civilian fusion companies, and restricted investment flows. 

Most telling of all, however, was China’s apologetic response to the U.S. recent downing of an alleged Chinese surveillance balloon. Unlike past, hostile rhetoric, the China foreign ministry expressed “regret” over the incident, vowing to “maintain communication with the U.S. side to properly handle this accident.”

Europe too has witnessed positive vibes from the Middle Kingdom. President Xi welcomed German Chancellor Olaf Scholz in November signaling both countries’ intent on maintaining strong relations while French president Emmanuel Macron plans to visit China in April.

Whether it’s throwing punches or doling out flowers, China is not really interested in ideological alliances or an international rules-based order. Whether you call it socialist market capitalism or pseudo-communism, China’s approach is one of a kind.

Going it alone often begets chaos. It’s simply hard to predict China’s mood at any given time.

Ultimately, however, Beijing does want to be a global citizen, just on its own terms. Expect surprises, good or bad, and then roll with the punches when they inevitably come.

Stanley Chao is managing director of All In Consulting, a Los Angeles-based firm which focuses on business development in China. He has worked in China and the Asia Pacific region for more than two decades and is the author of “Selling To China.” Follow him on Twitter @stanleychao6.