Latest / China Considered / China Unveiled: 30 years of Business Insight with Joerg Wuttke

Transcript

China Unveiled: 30 years of Business Insight with Joerg Wuttke · China Considered

0:03
[MUSIC]
0:06
>> Elizabeth Economy: Welcome to China Considered, a podcast that brings fresh
0:10
insights and informed discussion to one of the most consequential issues of our time,
0:14
how China is changing and changing the world.
0:17
I'm Liz Economy, Hargrove Senior Fellow and co-director of the US-China in
0:21
the World program at the Hoover Institution at Stanford University.
0:25
Today I have with me,
0:26
Joerg Wuttke, who is a partner at the consulting firm DGA Albright Stonebridge.
0:31
But he's also spent more than three decades working in China,
0:34
most recently as the vice president and
0:36
chief representative of the powerhouse German chemical company BASF.
0:40
And for much of that time,
0:41
he was president of the European Union Chamber of Commerce in China.
0:45
Joerg, thanks so much for joining me today.
0:47
>> Joerg Wuttke: Wonderful to be with you.
0:50
>> Elizabeth Economy: So you actually started working in China in 1988 for ABB,
0:54
a Swiss-Swedish engineering and power company.
0:57
That was really a pioneering time for multinationals in China.
1:00
Can you give us a sense of what it was like to be living and
1:03
working in China during those sort of early years?
1:07
>> Joerg Wuttke: Well, it was the best and the worst of all times.
1:09
It was really pioneering days because 88, I came for the first time in 82.
1:14
I was there moonlighting a bit in 87 for, at that time, BBC,
1:19
then later ABB and 88 to June 89 was just fantastic.
1:23
I mean, the cultural life was so rich.
1:26
You had spectacular TV programs.
1:29
It was very open discussion.
1:30
Of course, then June 89 happened and the whole house came crashing down.
1:34
That's why I also left in summer 1990, because business absolutely took a major
1:40
hit and only recuperated when Deng Xiaoping took his 1992 Southern Tour.
1:45
So 88 to 90, it couldn't be more different in these years.
1:49
But again, you experience a China which was very poor,
1:53
which was humble, and people were super curious.
1:56
And that's very different from today.
1:58
Nobody's humble anymore and few people are curious in China.
2:02
>> Elizabeth Economy: But how was it sort of establishing the venture in terms of
2:07
just setting it up?
2:08
And were there rules and regulations?
2:10
Was there a lot of corruption?
2:12
What was sort of the business environment for you early on?
2:17
>> Joerg Wuttke: It was mostly trading, it was mostly exporting to China, selling
2:20
into China, very little investment, because the law was not really there.
2:24
And China was very reluctant to open the door for foreigners.
2:28
They felt like foreigners take advantage.
2:30
Again, the Chinese interlocutors were very inexperienced and the market was very,
2:35
very small.
2:35
So ABB, at that time was selling switch yards, everything around a power station,
2:40
also some train components.
2:42
And that's what China needed gradually.
2:44
But of course, it was all about negotiations about payment terms and
2:48
so forth, investment, in essence, only started in the mid-90s.
2:52
>> Elizabeth Economy: Okay, so let's talk about then,
2:55
sort of moving forward from that late 80s period through to today.
2:59
What did you see were sort of the major inflection points or
3:03
shifts in the business environment for multinationals?
3:07
Were there certain moments in time when things just seem to open up or close down?
3:13
How did the environment change, you know,
3:16
over the course of the sort of three decades or more that you were there?
3:19
>> Joerg Wuttke: I left in September 1990.
3:21
It was grim, depression was really in the economy and in the mindsets of people.
3:27
Foreigners did not really look at China as a possibility anymore.
3:30
It looked all very grim.
3:31
And I came back in March 93, and of all cities across Shanghai,
3:35
which at that time was sort of the vanguard in opening up China again,
3:39
it's all down to one man, Deng Xiaoping.
3:41
And I recall how I was invited by the mayor to see the Shanghai of the Future.
3:46
It was March 93 and it was in a huge warehouse in Pudong.
3:51
Nothing around it, only mud.
3:53
And there was an incredible city built out of wood, carved out of wood.
3:59
And I said to my assistant, let's go.
4:01
This is crazy, this will never happen.
4:03
Now of course, not only did it happen,
4:05
it happened faster than I thought it would be.
4:07
And that has never left my mind that actually when the Chinese puts
4:10
their mind to it, it's going to help, it's going to develop.
4:14
And that's when actually investment started.
4:17
China was discussing then in late 90s,
4:20
the accession to WTO, there was a better legal framework.
4:26
China actually came out of the Asian financial crisis much better than all
4:30
the other countries.
4:31
Japan took a hit.
4:32
So in a way, China all of a sudden looked cool and looked much better.
4:36
Courtesy also that the others actually had really problems.
4:39
And then of course, nobody looked back until recently, it was just the wild 90s.
4:45
>> Elizabeth Economy: And if you had to sort of pick a time that you thought
4:48
was the most challenging, putting aside Covid, which we want to talk about in
4:53
a few minutes, was there a moment where you felt like, this is really difficult,
4:58
this is just not working?
4:59
Was there a particular challenge that you faced where you felt like BASF,
5:04
because by then you were working for BASF, right?
5:07
>> Joerg Wuttke: Yeah. >> Elizabeth Economy: You've left that you
5:09
felt like, this isn't really going to work for us here?
5:14
>> Joerg Wuttke: Well, 89 was really difficult.
5:16
June 89, we had to withdraw people.
5:19
We had to close down construction sites because of the shooting in Beijing.
5:23
And basically getting these construction sites up and running to negotiate with
5:28
the Chinese on these situations where we had to catch up, it was really difficult.
5:33
And I will remember these long night sessions that we had.
5:36
So 89 with ABB definitely was the worst period that I negotiated ever in.
5:42
The second was in 9798 Asian financial crisis,
5:46
BASF I joined them in late 96, basically decided to have
5:50
a $3 billion project developed in Nanjing which was incredible.
5:55
It was basically viewed as are you crazy?
5:58
Because the economy around China went down in flames.
6:02
The market had no real regulations to deal with monster projects like that.
6:07
And of course a headquarter nervous and the capital markets got very nervous.
6:12
What are you doing there?
6:14
And that's when I learned entrepreneurial spirit.
6:16
The CEO at that time and the Asia board member Mr.
6:19
Hamreich, who actually employed me in 96,
6:22
they showed how it is possible in a situation like that to develop a project.
6:27
And it worked out.
6:29
It's now by far one of the most profitable operations that BASF has globally.
6:34
It's a 50-50 joint venture.
6:36
Also something interesting, most people say joint ventures never work.
6:39
So in a way you all of a sudd that if you have a long term vision and
6:43
if you actually see the fault lines of the economy, the market development,
6:48
if you hang in there and if you do the right things, invest when nobody's
6:52
investing, buying cheaper machinery, you actually can get going.
6:56
So in a way I'm sure this these days will not repeat themselves anymore, but
7:00
it is just something about entrepreneurship.
7:04
>> Elizabeth Economy: So okay, let's just drill down on that for
7:06
a minute because you know the investment environment you're suggesting was quite
7:11
different in China from what maybe you would experience in Germany, for example.
7:16
Can you talk a little bit about what that entrepreneurial spirit meant like on
7:21
the ground, what is it that you had to do to get the venture up and running?
7:26
>> Joerg Wuttke: Well, first of all, you had to find the right people.
7:28
We were lucky to have an empathetic, very, very considerate,
7:33
along German, an engineer who really had lots of patience.
7:37
Lucky to actually have a company that can sort of scan the operations back home,
7:42
who is a possible person.
7:43
People underestimate the importance of individuals in situations like that.
7:48
The second is just to be convinced that basically the market is gonna be there,
7:53
you just have to hang in there and just do it.
7:56
Strategy has to be right, but then also tactics has to be right.
7:59
And at that time.
8:00
It was primarily also reaching out to the Chinese leadership.
8:03
It was our patron at that time was Prime Minister.
8:07
He looked after BSF, he wanted the project.
8:10
He came to our headquarter in Germany and we basically then had a gentleman
8:15
who helped us to find the confidence to do this $3 billion project,
8:19
while the capital markets actually looked at BSF as if they have lost their marbles.
8:25
So in a way, the other one is, of course, to have a joint venture
8:29
partner that you can trust and trust building takes a long time.
8:33
You just don't get it right away in particular,
8:35
not with a state run enterprise.
8:37
And trust is, again, human to human.
8:39
It's about the chairman of Sinopec at that time who actually when this whole
8:43
Sinopec in the Northwest Petrochina was falling apart and then got regrouped,
8:48
put together.
8:49
He came to Germany in order to tell the top management and
8:53
the stakeholders guys the market is good.
8:56
So in a way, at the end of the day, it boiled down to people to people that
9:00
actually got projects going despite very adverse circumstances.
9:05
>> Elizabeth Economy: And without saying whether you actually had to pay anybody
9:09
any bribes, were you approached to sort of pay people off?
9:13
We hear a lot about corruption in China and sort of endemic corruption.
9:18
And obviously, Xi Jinping, current leader has had an ongoing anti corruption
9:23
campaign, one that seems to have no end even now, 12 years into it.
9:28
How important was sort of navigating that corruption over
9:33
the course of your time there?
9:35
>> Joerg Wuttke: In the electrical engineering businesses was really
9:39
difficult for many reasons.
9:40
This area was quite corrupt in the early 90s in particular.
9:46
And the second is it was tax deductible in Germany, [LAUGH] so it was actually legal.
9:50
So in a way, that was a dark period it and I will cover it in my forthcoming
9:55
next year autobiography that I was so happy then to leave that business and
10:00
go to chemicals, go to a company that never used a single agent.
10:05
Staying away from middlemen or middlewomen,
10:07
it's just trying to have a direct contact with decision makers.
10:11
And that was kept in the 27 years that I was heading this office in Beijing.
10:17
Again, you have to have the guts and then also, of course,
10:22
the systems in order to stay away from these kind of people.
10:26
And the system means that you have to have very good compliance teams,
10:30
you have to good education of your people,
10:33
because there's always the occasional procurement office corruption scandal.
10:38
But once it sort of gets into the headsets of people in the government or
10:43
with business partners, that BSF is not to be bought.
10:46
You cannot actually get business.
10:49
If we pay customers, for example, or if a client's suppliers give us money for
10:54
these huge projects in order to get favorable treatment,
10:58
you actually are steering a ship which is in smooth and very nice waters.
11:03
If you don't do this, you are subject to corruption campaigns to
11:07
basically fashionable areas where this guy goes out, this guy goes in,
11:12
and then all of a sudden you have been connected with the wrong person.
11:17
So if you stay away from that and you keep it this way, actually,
11:21
you're pretty in safe hands.
11:22
It's not easy though.
11:25
>> Elizabeth Economy: So let's fast forward to today or just a year or
11:30
two ago.
11:31
Most of us here in the west experienced China's COVID lockdowns,
11:36
you through news reports or through videos on the Internet.
11:40
You lived through COVID in China.
11:43
Could you talk about the impact on your life,
11:47
on the life of the international business community?
11:51
How did it affect your sort of daily life and the sort of life of your business?
11:58
>> Joerg Wuttke: Well, I was in two important positions as heading BSF in
12:01
Beijing, as well as chair of the European Chamber.
12:03
So I couldn't just leave the country and then go through two, or three, or
12:06
four weeks of quarantine to come back again.
12:08
So I was three years stuck in China and the last year I was stuck in Beijing,
12:13
I couldn't leave Beijing.
12:15
And we had a situation where it was emergency upon emergency.
12:20
I mean, on the one hand, communication to members of how to navigate that situation.
12:24
Then on the side, I had to buy 160 million masks for
12:28
BSF on behalf of Angela Merkel and stuff like that.
12:32
Every day was nerve wracking in a way.
12:35
But again, 2020 second part, 2021 was the best year ever in business.
12:40
Turnover was incredible, because the world needed electronics and
12:43
healthcare equipment from China.
12:45
And then, of course, we went into 2022 and then, of course,
12:50
Shanghai was setting the stage lockdown and then daily testing.
12:54
And at the end, it became insane.
12:57
The kind of effort the Chinese government did in order to actually keep COVID out,
13:01
though the game has changed with a totally different virus.
13:04
I was writing a letter to the Vice Premier Hu Tung Hwa,
13:07
that got leaked on purpose by the State Council to initiate discussion.
13:12
And I could sense that there are so many decision makers in the Chinese government
13:16
that are against zero COVID, but it came from the politburo.
13:19
And then at the end, basically, it was policy.
13:22
And until the 7th of December,
13:24
it was then basically a country which was under tremendous lockdown.
13:28
Then it opened the floodgates and you know what happened?
13:31
Million people possibly died.
13:33
So it was bizarre.
13:34
And I think during this process, a lot of psychological damage happened,
13:38
particularly for people in Shanghai, particular also for the economy.
13:43
And it was overlaying also the other challenges that China was facing.
13:47
A real estate market, which was overblown, was deflated and then crashed, in essence.
13:52
And then the world doesn't need necessarily all these medical equipment,
13:56
electronics.
13:56
So in a way, we came back in 2023, first quarter, and thought, okay,
14:01
come back story as usual.
14:03
There was a brief restocking and then [LAUGH] we were on a plateau.
14:07
Nothing really happened, not in economics, not in politics.
14:11
In October 2022, this infamous party congress triggered this point
14:16
that actually reforms are not gonna be around the corner.
14:20
The leading out of Hu Jintao was the visual about the old days are gone.
14:24
And then ever since, China's economy has been limping along.
14:27
And it's just amazing to see that instead of the past where
14:30
Chinese government could step in fast and fix it,
14:34
we are now seeing band aids that are handed out for amputations.
14:40
>> Elizabeth Economy: [LAUGH] So that's a great visual, band aids for amputations.
14:43
So to what do you attribute sort of the failure of the Chinese government
14:48
to come in and actually just as you say, resolve the issues,
14:53
clearly they know what the problems are.
14:56
I mean, many of these problems are long standing.
14:58
It's not like they're facing new issues.
15:01
So what do you think is the holdup here?
15:03
What's preventing them from taking the kinds of actions that you and
15:07
I know a number of Western and even Chinese economists have been proposing?
15:11
>> Joerg Wuttke: Well, I mean, my position paper, I think the last one I launched in
15:16
September 2022 was ideology trumps the economy.
15:19
They're boxed in.
15:21
>> Elizabeth Economy: This is a European chamber position.
15:23
>> Joerg Wuttke: That's right, that's right.
15:24
And I made it a point of that they have boxed themselves in.
15:30
The success story that was justified in 2021 turned out to be a disaster in 2022,
15:35
but they couldn't change the position on that one.
15:38
So they carried on with a policy, which definitely was not fitting that
15:42
particular virus that was not circulating anywhere in China, but
15:46
then came like a tsunami across this country.
15:49
So in a way, it is something where I can sense that the working
15:55
area there is sub director generals and division chiefs.
16:00
Definitely knew that there was something not very well in its development,
16:04
but at the same time, at the very top,
16:07
I think it's one of these downsides of having an echo chamber.
16:10
They believed the propaganda,
16:12
they believed the data set that they believed is the right situation.
16:15
So it was all about success, success.
16:18
And then at the end, the question is,
16:20
who is going to talk to the Emperor to say, we have a bit of a problem.
16:25
>> Elizabeth Economy: And do you think there's anybody in the leadership that can
16:28
talk to the Emperor and say, there's a problem, you have no clothes [LAUGH]?
16:32
>> Joerg Wuttke: [LAUGH] Well, it's a group.
16:35
Yeah, well, it's a group of people that definitely are creating this echo chamber.
16:40
And it's three or four of them.
16:42
I would say there are very smart people in the leadership.
16:45
Definitely in the countryside, in the provinces Chongqing, Shanghai,
16:49
Xinjiang has great party leaders.
16:51
But I guess that the system is now so clearly focused on we follow
16:56
the Xi Jinping line that they don't dare to waver and change from that.
17:01
The corruption campaign goes on.
17:03
You never know if that's really because people are corrupt or
17:06
basically they get pushed aside.
17:08
So in a way, there is this echo chamber.
17:10
It might change in 2027 when the kind of leadership under
17:14
Xi Jinping might be exchanged with a more open minded generation.
17:19
Because also keep in mind this leadership is socialized during
17:22
the Cultural Revolution.
17:23
And that is something which then will face people that have been studying abroad,
17:28
speak foreign languages, are technocrats, totally different mindset.
17:33
So I hope that in 2027 we see a change.
17:36
>> Elizabeth Economy: Okay, so there's also been a kind of drop off,
17:39
a fairly significant drop off over the past few years in foreign direct
17:44
investment and foreign venture capital coming into the country.
17:48
I know that when I traveled to China, a year ago August with the secretary,
17:53
US Secretary of Commerce, all of the Chinese leaders were saying how much
17:58
they wanted foreign investment backed.
18:00
They were welcoming multinationals.
18:04
What's your sense for the degree to which the Chinese leadership is prepared to take
18:10
steps to get multinationals back investing and doing more business in China?
18:16
Is this a serious sort of issue for them?
18:19
Are they taking it seriously?
18:21
Or is this something where they're just kind of saying these things,
18:24
but they're not really prepared to take the necessary steps?
18:28
>> Joerg Wuttke: I noticed a difference in the countryside and in Beijing,
18:31
the capital, it's in the countryside,
18:32
people really want to have foreign investment.
18:35
They go the extra mile in particular cities like Chongqing, for example,
18:39
Shenyang really was rolling out the red carpet.
18:41
But there's so much they can do if the policy out of Beijing comes you have to
18:46
have self reliance.
18:47
30% of products in hospitals are supposed to be Chinese brands,
18:52
not just manufactured goods made in China, but actually domestic brands.
18:57
It's something which actually really undercuts these efforts of mayors and
19:01
party secretaries in the countryside.
19:04
It's a big scheme, it's a big plan that Beijing wants to impose.
19:07
And so, yes, there's a lot of Sunday speeches in Boao, China Development Forum.
19:13
We want more but at the same time we have 6,
19:16
8% of all the issues in the European Chamber position paper and hey,
19:21
we talk about 1000 cases on 430 pages.
19:24
6 to 8% are being resolved every year.
19:28
So the book is swelling and we hear these speeches and
19:32
the word that came up a couple of years ago,
19:35
I mentioned that in a press conference, is of promise, fatigue.
19:40
But the situation has in this far also changed that.
19:43
If you have a very closed market,
19:45
very difficult market with a very strong economic growth pattern behind it,
19:49
you still hang in there and you have a certain optimism.
19:52
Now you have a market access problem and an economy which is limping along.
19:57
And another economy which is less incredibly strong, like the US and
20:01
like India coming up, all of a sudden you've got choices.
20:05
And I think that's what some leaders, particularly in the countryside,
20:09
realize is foreign investors have choices.
20:12
And that's why we see less and less in equity investment and less and
20:16
less in real investment.
20:18
And when you look into the European dataset, 66% of European investment into
20:23
China comes from German companies and half of that from three car companies.
20:28
So in a way, it becomes very top heavy.
20:31
And the SMEs are basically putting everything on hold.
20:34
>> Elizabeth Economy: Yeah, so
20:35
what does it take to be successful in this environment?
20:39
You're painting a pretty bleak picture,
20:41
which is one I have to say I hear echoed by companies in the United States.
20:45
And now you're working with US Companies as well.
20:48
So I think you're probably hearing the same things.
20:50
There's a lot of symmetry between what the European Chamber presents in terms of how
20:55
its companies are feeling about what's going on in China and
20:58
what the US chamber presents.
20:59
I've always been struck, frankly over the years by just how closely
21:04
the percentages match, both in enthusiasm and then lack of enthusiasm.
21:11
But I guess I'm just wondering, is there still room to be successful?
21:16
What is it you talked earlier about, you got to hang in there,
21:20
have a long term vision.
21:21
Are those still things that can see companies through or
21:25
is this a really just a fundamentally different time where companies
21:30
are just really reevaluating their entire investment?
21:34
Sort of thinking around China.
21:37
>> Joerg Wuttke: Yeah, what has changed is definitely the economy is not as strong as
21:42
it used to be.
21:43
Certainly not 5 and 6 and 7% more.
21:45
1 or 2 or 3% at best.
21:47
Second, you have massive overall capacity.
21:50
By the way, I covered that topic in 2016 as well as and 2009.
21:57
Overcapacity in China is not a bug, it's systemic.
22:01
And of course then lots of people make lots of stuff, but nobody makes money and
22:05
it has a deflationary impact that is not very helpful for European investors and
22:10
companies doing business there.
22:11
Again, you have self reliance.
22:13
And on top of it, Chinese companies are just very strong in development,
22:17
not necessarily in research.
22:19
We have incredible leapfrogging in technologies among Chinese machine
22:24
builders, chemical companies, and then of course the famous electric vehicles.
22:29
And so what does China offer us now?
22:31
Well, it offers us pockets of growth, but
22:34
it still offers us what I would call the China fitness club.
22:37
It has incredible deep bench of very good engineers.
22:40
50 out of 100 top end engineering universities globally are in China.
22:47
In chemicals, it's about 46 out of 100.
22:50
So in a way, even if you don't sell in China,
22:53
you are very well better positioned if you actually manage to develop in China.
22:59
The other thing is that you learn speed.
23:01
Again Germany, it might take 24 months to get stuff out of the lap and in China's
23:06
15 months because the customers are more risk savvy and are more demanding.
23:11
So what we should not underestimate is the fact that even with a very dire
23:16
economic background, you can still develop a lot of product in China.
23:21
You can unlearn how to build cars and you can develop mobile phones on wheels.
23:26
You can develop chemical sites that are nowhere else to be built but in China,
23:30
because there are half of the Chinese global customers are there.
23:34
And the other one is of course the designability.
23:37
China has very funky ideas, very good designers.
23:40
And just if you go to Rockville Montgomery,
23:42
where I wanted to buy a BMW and the guy said, you're German,
23:46
you should buy the new 7 Series made in Germany.
23:48
I said, yeah, it's made in Munich, but it's designed in Shanghai.
23:52
>> Elizabeth Economy: So in a way it sounds almost like you're suggesting that
23:56
Xi Jinping's idea of dual circulation.
24:00
Is working right?
24:01
This idea that you can innovate, manufacture and
24:04
consume largely within China, you're still gonna export,
24:09
there will be a few areas of import of capital and know how.
24:13
But for the most part you're developing an entire market that is sort of
24:18
designed to produce, to consume within China.
24:21
Is that, am I getting that right from what you just said?
24:24
>> Joerg Wuttke: Well, you have one foot on the gas pedal and
24:27
the other foot on the brakes.
24:28
So in a way his policy actually brings the focus on resources again,
24:32
the government help.
24:34
But also helps in order to have the Chinese companies competing
24:39
based on customer changes at the same time, foot on the brakes.
24:45
Because it's more and more difficult for
24:48
Chinese private enterprises to operate here, then you have a brain drain.
24:53
You have lots of people, particular Chinese top end engineers leaving China.
24:58
So in a way the picture generates a lot of smoke and a lot of noise.
25:03
But as a matter of fact they could do so
25:06
much better if they would focus again on what they did best from 2000 to 2020 or
25:12
2015 is let the Chinese entrepreneurs develop stuff.
25:16
So in a way we still see pockets of development,
25:20
I mean CATL, BYD, FA and so forth.
25:23
But at the same time you can clearly see where the loans are going,
25:27
you can clearly see who's going bankrupt.
25:29
Soes get the money and the private enterprises go belly up.
25:32
And that is not what brings you innovation that Xi Jinping wants.
25:36
And on top of it, it's all about manufacturing,
25:39
as if China doesn't produce enough already.
25:42
>> Elizabeth Economy: [LAUGH] So let me just pick up on this last point that you
25:46
made about the sort of the brain drain because China is experiencing
25:52
a significant loss of expert in the expert community.
25:56
And you are a prime example,
25:59
someone who left just this summer after so time in China.
26:03
But I think others too who really had a deep commitment to the country and
26:08
to the sort of economic opportunities in China.
26:11
And just this year, last year,
26:13
all of a sudden there seems to be this exodus of foreigners.
26:18
And as you're suggesting of Chinese,
26:20
is there something in particular that's driving at this moment?
26:24
Is it just this post Covid sort of realization that this is a difficult time
26:28
and it's not gonna get better?
26:30
Or is something else going on that sort of producing this
26:35
groundswell of people leaving the country?
26:39
>> Joerg Wuttke: Well, there were not many people to leave China in the first place.
26:43
We did a survey in 2021 and showed that there are 60,000 Europeans,
26:48
including children, living in China.
26:51
So you could fill the bird's nest and still have space for the Brits.
26:55
And so in a way, I would say in Guangdong and In Southwest China,
27:00
2/3 of expats left also, not only because it fel.
27:05
It doesn't have the right system anymore.
27:07
The hospitals are not up to it.
27:08
The schools were shrinking, schools in kindergarten, foreign schools,
27:13
kindergarten were closing.
27:14
But also, yet the feeling is like it's no fun anymore.
27:17
China was a lot of fun all the way until Covid and then it became the stifling
27:22
country that also was approaching everything in your life with surveillance.
27:27
So it wasn't that good anymore and you had other choices again
27:30
other countries were doing quite well, opening up faster, having better economy.
27:35
And then on top of it, of course, you have Chinese leaving.
27:40
It might be a trickle, but it's a couple of 10,000 very rich Chinese.
27:45
My neighbors in Beijing, one third of the houses was dark at night.
27:50
Many of them left for Singapore, Thailand, Tokyo or
27:53
United Emirates because they were fed up, fed up with political surveillance.
27:59
And secondly also they just wanted to make money elsewhere and
28:03
not be afraid about common prosperity,
28:05
that maybe the party that has talked about it is reaching for their pockets.
28:09
And these are actually the catalysts in the Chinese economic development that
28:13
are missing right now.
28:14
So in a way it's still, it's a rich country when it comes to brain power,
28:19
but boy, it could do so much better.
28:21
>> Elizabeth Economy: It sounds like a lot of self inflicted wounds here from the top
28:26
leadership.
28:27
Okay, so let's just do a quick lightning round.
28:31
Let me get your take on a few questions,
28:35
if you had to have one must read book or article on China,
28:40
aside from all of your excellent EU chamber reports, what would it be?
28:47
>> Joerg Wuttke: Besides your own book list, of course.
28:48
Yeah okay, thank you.
28:50
I would say that Kevin Rudd just brought out a fantastic book about
28:55
Xi Jinping's thinking.
28:57
It's not an easy read, but he makes it easy for you.
29:00
You can read the first two or three chapters and the last two or
29:03
three chapters in between you have to digest a lot of Marxists.
29:06
But it is, I think, the best book about where China's coming from and
29:10
definitely where China's heading.
29:12
So if you actually are able to deal with political language,
29:18
then read this book clearly.
29:21
And the best article is written by my friend from Rhodium, Logan Wright.
29:25
The article is called Peak China and he clearly lines up where the problems
29:30
are and that we have to be realistic that China will not bounce back and
29:34
will basically limp along.
29:37
He has a great data set in there.
29:39
I think these two books are just reality checks.
29:42
So there are too many people out there who want to see the good news or
29:46
want to see China cracking and crashing.
29:48
These two basically are individuals that see China as it is.
29:53
And that's why I can recommend these, this book and this article.
29:57
>> Elizabeth Economy: Terrific, so what do you miss most,
29:59
and least about your time in China now that you've been out for.
30:03
I guess it's been, what, four months or so since you left?
30:06
>> Joerg Wuttke: Four months, exactly.
30:07
So, yeah, well, 35 years was a long time and
30:11
I was really lucky getting into China when China took off.
30:16
And I wouldn't say I left before China lands, but
30:20
definitely heydays were until I would say 20, 21.
30:25
I left but I missed the most food, of course, the Chinese cuisine.
30:31
That is really a challenge in Germany as well as here,
30:34
despite the fact that you have very good Chinese cooks.
30:37
Let's see if Rockwell can swing the needle but the other one is definitely friends.
30:42
I was back in Beijing in November.
30:45
I met lots of friends, I was catching up.
30:48
But it was a strange visit because in a way, I saw my old city again,
30:51
where I lived more than 32 years, and I was not coming home.
30:55
I was on a visit, and I felt like that.
30:58
And the thing I miss, definitely will not miss, is this surveillance thing.
31:02
At the end I took it personal that the Financial Times, New York Times,
31:06
Wall Street Journal, all these print papers came in bits and pieces.
31:09
And then we had the idea, the FT correspondent, Joe and myself,
31:14
that maybe we should cover my house.
31:16
There's a Weekend edition on House and home where basically he featured me with
31:21
furniture, but I could actually say what I thought about China.
31:25
And sure enough, the sensor did not look into the Weekend Edition House and
31:29
home and there it is.
31:31
>> Elizabeth Economy: I'm gonna be looking for that now.
31:33
I missed that one.
31:35
So that sounds great.
31:36
Okay what China issue do we not know enough about?
31:40
Like what? What are we missing here outside
31:43
the country?
31:44
What don't we really understand about the country?
31:47
>> Joerg Wuttke: That the Party is not the country.
31:49
It's the people.
31:50
It's the culture, it's the civilization.
31:52
Certainly the party has done a lot of good since Deng Xiaoping came into office.
32:00
But again, it's the people.
32:01
So read, read novels, read, look at the culture of China,
32:07
go into museums, visit China, try the food.
32:11
And don't always think that whatever you hear about China, all this party slang and
32:16
jargons, that is China, it's much, much more than that.
32:20
>> Elizabeth Economy: Completely agree with you.
32:22
Last question.
32:24
How likely are we to see a new opening or a breakthrough in EU China relations,
32:30
particularly with the return of President Trump in the United States?
32:36
There's a lot of, I think,
32:38
hope in Beijing that this is going to give a new life to EU China relations.
32:44
What are your thoughts?
32:46
>> Joerg Wuttke: Well, on a scale to 1 to 10, I give it a 0.
32:48
I see no chance.
32:50
Definitely it's first of all, China has little to offer.
32:53
We can see that in the so called negotiations on these EV tariffs.
32:59
Second, the mood in Europe has changed.
33:01
Ukraine war is to be blamed on that.
33:04
And then Trump will definitely not give the Germans and
33:07
the French wiggle room in order to do a separate deal with China.
33:12
So the relationship in the next four years between Europe and China will
33:16
be very much under Trump's shadow and let's see how we come out of that.
33:21
But certainly I don't expect anything.
33:24
It's very sad to say.
33:25
As a European and
33:26
especially someone who was in a prime position in order to steer business.
33:32
I still hope that we in Europe remain open to Chinese investment,
33:36
which is quite different from the United States.
33:39
I hope that China realizes that it cannot cause a rift between us and
33:43
the United States, something they are so skillfully trying every year.
33:47
But again, I don't know, maybe it's just a moment of depression, but I see no chance.
33:54
>> Elizabeth Economy: Okay, well, on that somewhat dark note, let me thank you, but
33:58
also say I'm very much looking forward to your autobiography.
34:02
Do you have a title or.
34:04
>> Joerg Wuttke: Not yet?
34:05
Not yet.
34:06
In a way it is really covering my parents already as refugees from the eastern
34:12
part of Germany, growing up in a small village in southwest Germany.
34:17
And then ending up as chairman as an illustrious guy in Beijing and
34:22
now even coming to Washington.
34:24
Sometimes I wonder what happen happen to me.
34:27
>> Elizabeth Economy: Well, I can't say, but
34:28
that we are extremely grateful to have you here in the United States.
34:31
Jorg, you are a true international asset, I would say so.
34:37
Thank you for taking the time to speak with me.
34:40
And I look forward to featuring you again when your book comes out.
34:46
>> Joerg Wuttke: Thank you.
34:47
>> Elizabeth Economy: If you enjoyed this podcast and
34:49
want to hear more recent discourse and debate on China.
34:52
I encourage you to subscribe to China Considered via
34:54
The Hoover Institution YouTube channel or podcast platform of your choice.
34:58
In the next episode, we'll be diving into the world of US China technology
35:02
competition with Jimmy Goodrich, one of the US's leading experts on
35:05
China's semiconductor industry and technology strategy.
35:08
[MUSIC]