Xi

"Xi has forcefully pushed back on the idea that China needs more generous welfare. In a major speech in 2021, he said, “⁠[Even when we have reached](private://read/01k3jwt46q240aq6fe12mqkyr0/16_Notes.xhtml#_idTextAnchor318) a higher level of development . . . we should not go overboard with social transfers. For we must avoid letting people get lazy from their sense of entitlement to welfare.” Worrying that welfare could make the people lazy is one of those instances when a Communist Party leader sounds like Ronald Reagan.⁠"

"So far, China hasn’t felt the economic pressure to abandon low-end manufacturing (clothing, footwear, and so on), in part because there are still a lot of poor Chinese provinces like Guizhou that have cheap labor. That trend might not hold given escalating tariffs. But if Xi is successful, it means that other developing countries (in Asia, Africa, and around the world) will be unable to climb the industrial ladder that China reigns over. Developed countries have reason to be alarmed as well. Since China is so large, it has the financial firepower to target any industry it wants for technological leadership. Small countries have had to pick their battles, as Denmark did in the wind industry and South Korea did with memory chips. China wants to have it all."

"The results of the Chinese government’s unceasing interventions in the economy are at best ambiguous. [Economic studies have shown](private://read/01k3jwt46q240aq6fe12mqkyr0/16_Notes.xhtml#_idTextAnchor378) that the recipients of Chinese subsidies have, on average, lower productivity growth. Xi’s aggressive promotion of industry has triggered trade wars with not just the United States but also many developing countries as well. China’s tech successes are no convincing demonstration that a wise state can plan the future. When the state shoves its weight around—forcing foreign companies to hand over technology, showering a favored sector with subsidies, injuring a firm while elevating another—it is often far from being helpful. The forced technology transfer agreements meant to prop up China’s state-owned automakers instead robbed their need to invest in their own innovative capacities. China’s automotive successes come from companies like privately owned BYD, which had no foreign partners, after the entrance of wholly owned Tesla forced the company to raise its game."

"On a 2023 inspection tour through Jiangsu province (like Guangdong, a manufacturing powerhouse), Xi said, [“The real economy is the foundation](private://read/01k3jwt46q240aq6fe12mqkyr0/16_Notes.xhtml#_idTextAnchor380) of a country’s economy, the fundamental source of wealth creation, and an important pillar of national strength.” It is the basis, he continued, of “human production, life, and development.” He has repeatedly said that China needs to prioritize the real economy, which means the world of manufactured products, rather than the virtual or financial economy, sometimes referred to in state media as the “[fictitious” economy](private://read/01k3jwt46q240aq6fe12mqkyr0/16_Notes.xhtml#_idTextAnchor381). State-affiliated researchers commonly denounce financialization with the hollowing out of manufacturing in the same breath."

"[Batson has furthermore detected](private://read/01k3jwt46q240aq6fe12mqkyr0/16_Notes.xhtml#_idTextAnchor382) a shift in Xi’s rhetoric on manufacturing. Previous Chinese leaders have talked about the importance of upgrading industry, which sometimes means limiting investment into labor-intensive or highly polluting sectors that China no longer needs. Xi has declared that China targets completionism, which means that not even “low-end industries” should move out of China. Rather than follow economic logic, in which production gravitates toward countries with lower labor costs—which the United States and other high-income countries have more or less accepted—Xi does not want industry to keep shifting around."

"The point, however, isn’t to condemn Cook or Apple. It’s to convey the predicament they’re in. At the turn of the millennium, Washington made a bet on China—a bet that free trade would liberalize the country and perhaps catalyze the creation of the world’s biggest democracy. Instead, trade enriched China and empowered its rulers. Cook shouldn’t be blamed by politicians for enmeshing Apple’s operations in China two decades ago, but he has erred by doubling down over the past decade despite mounting evidence that Xi has been ramping up repression at home and taking a more combative stance in international affairs. “You can say that we read them wrong, that we misunderstood China. But Jack Ma read China wrong, too. Every entrepreneur read China wrong,” says a supply chain expert who has lived in the country. “You look at what Deng Xiaoping and Hu Jintao were promoting—the [business class] didn’t see this coming. Xi changed the game completely. He’s another Putin in the making.” This person adds, “Look, I’m not a Cook fan. But you have to be sympathetic. He didn’t know what he was dealing with. Nobody did.”"

"Behind the basic principle was a wider legal history in China. Unlike the Rule *of* Law developed in the West, Xi was returning China to a Rule *by* Law tradition, a system of governance dating back more than 2,000 years. Rule *of* Law is about creating an impartial framework; Rule *by* Law is about controlling the population—or in this case, nudging corporate behavior. Beijing was not *explicitly* demanding anything for market access—that was illegal under WTO rules. But it was redesigning the system to make wink-wink arrangements more likely. As one Western businessman living in China at the time characterized the changes, “voluntary is the new mandatory.”"

"In light of Xi’s other actions, the *Consumer Day* attack on Apple the year before didn’t look, to Guthrie, like some one-off misunderstanding that Cook had neatly solved with an apology. It was a signal that Apple was in trouble. Guthrie began to see that Beijing was pivoting in ways that were bound to catch Apple off guard. It was becoming clear Xi would welcome foreign corporations only if they were “in China, for China”—and if they didn’t like it, they could leave. Guthrie began to fret that Apple’s enormous operations and retail presence in China were at great risk."

"As Xi took power, he emphasized a policy of “in China, for China,” and it didn’t look like Apple was sharing the wealth."

"Cupertino understands that openly supporting Xi’s plan for tech supremacy is politically taboo. But Apple’s message in Chinese media is, if not wildly supportive of the effort, then at least in sync with it. When *China Daily* reporters met Isabel Mahe in 2023, they quoted her saying: “Apple is happy and willing to help the country’s transition to smart manufacturing.” It paraphrased her, saying: “Previously, smart manufacturing equipment in Apple’s supply chains came mainly from non-Chinese companies, but now such equipment of local origin has become more common.” Mahe, like Cook, has portrayed these partnerships as “win-win,” seemingly oblivious to a quip that goes back at least a decade: “In China, ‘win-win’ means China wins twice.”"

"One episode demonstrating Xi’s hold over the party was captured on film. As Xi was poised to accept a third term as China’s ruler, his predecessor, Hu Jintao, was sitting right next to him at the 20th Congress of the Chinese Communist Party, on October 22, 2022. When seventy-nine-year-old Hu reached for a red folder in front of him, another Chinese official removed it from his grasp. When Hu again attempted to grab it, Xi signaled to an aide, issued a command, and within seconds two aides lifted Hu by the armpit and escorted him out. As China journalist James Kynge writes: “As Hu was hustled out, none of a seated row of top officials even so much as turned to wish him well. They stared straight ahead, studiously ignoring his humiliation.” Inside the envelope, some experts believe, was a dossier that would have demonstrated that Hu’s key protégé wasn’t being elevated to the seven-member Politburo—the highest organ of the Central Committee. Xi had stacked the Politburo with allies, consolidated more power than any Chinese leader since Mao, and was set to rule for life."