[Trapped in the Chinese Economy]⑩ "Anti-market Policy Risks Persist... Deep Concerns"

Interview with Professor Kim Han-kwon of the Korea National Diplomatic Academy

"China has a clear goal of developing as a socialist country. Recently, the Chinese government has introduced various support measures for private enterprises to revive the economy, but I believe these are more supplementary measures rather than fundamental changes."

Professor Kim Han-kwon of the Korea National Diplomatic Academy explained this view on how the Chinese government perceives the economy in an interview with Asia Economy on the 8th. As China's economic recovery has been sluggish recently, the government under President Xi Jinping has been rolling out policies supporting private enterprises, which contradict the previously emphasized 'Guojin Mintui' (strengthening state-owned enterprises while reducing private enterprises) stance. However, these are described as short-term responses rather than a fundamental shift toward a market-friendly approach.

With the risks of Xi Jinping's anti-market policies still latent, Professor Kim predicted that U.S. regulations on advanced technology would impose a significant burden on the Chinese economy. He pointed out, "The Chinese government is investing a lot of budget to overcome U.S. containment, but it will be a tough fight. Even though China is a large country, it is difficult to handle the semiconductor industry alone, which is divided among South Korea, the U.S., Japan, and Taiwan."

However, Professor Kim said that for South Korea, completely excluding China and leaning heavily toward the U.S. is not advisable. He emphasized, "Other U.S. allies and partner countries are exercising 'strategic autonomy' while expanding cooperation with China. If even Japan turns away, South Korea would be the only country with increasing confrontation with China, which could become a diplomatic burden."

Professor Kim Han-kwon of the Korea National Diplomatic Academy is being interviewed by Asia Economy on the 8th at the Korea National Diplomatic Academy in Seocho-gu, Seoul. Photo by Heo Young-han younghan@

-The Chinese government has recently strengthened support for private enterprises to revive the economy. Is there a possibility that the 'Guojin Mintui' policy emphasized by President Xi Jinping will change to 'Minjin Guotui'?

▲The policies announced so far by the Chinese government are more like 'appeasing private enterprises' or a supplementary measure to enhance creativity rather than a fundamental change. Of course, depending on the future economic situation, the perception of private enterprises by President Xi and the party leadership may change, but it is still difficult to see it as a policy shift.

-Could China move further toward 'Minjin Guotui' to support private enterprises?

▲China continues to emphasize economic openness, but in practice, it shows the opposite by enacting laws like the Foreign Relations Law and Anti-Espionage Law. Even if the need for openness is felt, security concerns amid U.S.-China conflicts cause contradictions. Also, China criticizes the evils of U.S. capitalism and holds the view that 'money power should not surpass political power,' so there has been political dissatisfaction and concern about economic elites represented by private enterprises expanding their influence. Therefore, while talking about 'Minjin Guotui,' in reality, 'Guojin Mintui' is occurring.

-Is President Xi Jinping's declaration of 'common prosperity' and the promotion of 'Guojin Mintui' aimed at achieving true socialism?

▲China has clearly stated its goal of becoming a socialist modernized power by the mid-21st century, as emphasized at the 20th National Congress where Xi Jinping secured a third term, and afterward. China has a clear goal of developing as a socialist country. However, short-term policy priorities may change during the process. Currently, China is focusing more on responding to strategic competition with the U.S. than on common prosperity.

"U.S.-China Advanced Technology Hegemony Competition: A Tough Fight for China"

-How do you see the U.S.-China competition in advanced technology fields unfolding?

▲In advanced science and technology, China leads in some areas, and the U.S. leads in others. But semiconductors are fundamentally necessary in any field. China is investing heavily to overcome U.S. containment but will face a tough fight. The U.S. has established a division of labor with allies and partner countries, while China has to do alone what 'Chip 4' (South Korea, U.S., Japan, Taiwan) divides among them. Even though China is a large country, it is difficult. Especially in semiconductors, speed is crucial. Even if China catches up with technology developed by Samsung Electronics or TSMC two years ago, by then, Samsung or TSMC will have advanced further. China can acquire technology, but competitiveness remains challenging.

-President Biden plans to restrict U.S. companies' investments in China in advanced technology fields. Does this increase the likelihood of U.S. victory?

▲It is still difficult to say who will win the technology hegemony competition. However, based on the current situation, the U.S. and its allies and partner countries seem to have a slightly more advantageous position compared to China. Even if China temporarily finds other solutions, the U.S. will pressure with new mechanisms to block them. The U.S. will continue to enforce global norms and order on China.

-China recently started controlling exports of gallium and germanium in response to U.S. containment. What is the significance?

▲China is preparing negotiation cards against the U.S. Until now, China responded passively to U.S. pressure, but now it has begun to wield strategic weapons. What China most desires is the easing of sanctions on leadership personnel and companies. Although the U.S. has proposed various high-level negotiations, China selectively responds by welcoming discussions on economic issues with the Treasury and Commerce Departments but rejecting those with the Department of Defense, as the Chinese Defense Minister is on the U.S. sanctions list.

-China controls the global supply chain of rare earths and other minerals. It is difficult for the U.S. and allies to find alternatives to China.

▲It is difficult to find countries that can immediately replace China's raw material supply and mass production capacity. ASEAN countries like Vietnam cannot fully substitute China either. Above all, few countries want to give up China's huge market. Some partners like the European Union have expressed dissatisfaction with U.S. decoupling, which led the U.S. to shift to de-risking and hold high-level talks with China.

-Italy is considering withdrawing from China's 'Belt and Road Initiative' (connecting China, Central Asia, and Europe via land and sea Silk Road). Can the Belt and Road succeed?

▲China will not easily give up the geopolitical tool of the Belt and Road. While perspectives in Europe may change, it remains attractive to developing and underdeveloped countries. China will use the Belt and Road to expand its allies in the international community and draw underdeveloped countries to its side. The issue is whether developing countries will see satisfactory wealth distribution through the Belt and Road, which depends on China's financial capacity. Given China's economic limits, whether it can support these countries is a key measure.

Professor Kim Han-kwon of the Korea National Diplomatic Academy is being interviewed by Asia Economy on the 8th at the Korea National Diplomatic Academy in Seocho-gu, Seoul. Photo by Heo Young-han younghan@

"U.S. or China... A Dichotomous Choice Is Not Possible"

-South Korea has recently been leaning heavily toward the U.S.

▲Other U.S. allies and partner countries are strengthening their alliance with the U.S. while exercising 'strategic autonomy' to expand dialogue and cooperation with China. In other words, they maximize national interests. South Korea needs to respond by assessing where its values and national interests lie on each issue rather than making a national choice between the U.S. or China. In this process, it is necessary to closely examine the actions of major EU countries, Australia, and Japan.

-How are other U.S. allies and partner countries responding?

▲In multilateral diplomacy, other countries clearly express their positions on issues like values and human rights. However, in bilateral diplomacy, they separate value issues and approach them differently, exercising strategic autonomy. When many countries express opinions simultaneously, China cannot sanction just one country. For example, during the Hong Kong issue in 2019 and the Xinjiang Uyghur issue in 2020, multiple countries voiced opinions at the UN, preventing China from imposing sanctions. But if such issues arise in bilateral diplomacy or if South Korea alone takes a step further from its existing stance, problems occur. It is necessary to distinguish between multilateral and bilateral diplomacy in responses.

-There are many opinions that our government is cutting off China too much.

▲Choosing between the U.S. or China is too dichotomous. Other countries never do this and choose partners based on each issue. Even if South Korea exercises some strategic autonomy toward China, the U.S. is unlikely to single out South Korea due to fairness with other allies and partners. Currently, all major U.S. allies and partners are engaging in dialogue with China and gaining economic benefits. If Japan also does so, South Korea would be the only country with increasing confrontation with China, which could become a diplomatic burden.

-What should South Korea do to have 'strategic autonomy' between the U.S. and China?

▲The most important thing is that we must have technological capability and production capacity. In other words, we must have something China does not. Also, we should utilize South Korea's strategic value. If South Korea sharply leans toward the U.S., China will inevitably suffer losses in its Northeast Asia strategy and find it harder to handle North Korea. China wants a certain level of cooperation with South Korea for economic and strategic reasons, so South Korea needs to use this well.

Reform Stagnation, U.S. Pressure Expansion... Concerns Mount Over China's Economy

-Recently, China's economy is sluggish in real estate, domestic demand, and foreign investment.

▲During Donald Trump's presidency, China misinterpreted the U.S. intentions. The Chinese Communist Party leadership believed that Trump's pressure through trade agreements aimed to expand economic benefits and that if China conceded, U.S.-China relations would improve. To alleviate economic difficulties during concessions, China temporarily halted financial and real estate reforms. However, as strategic competition with the U.S. prolonged, financial and real estate reforms, which were already unstable factors, remained insufficient, and U.S. pressure intensified.

-What is the outlook for China's economy?

▲With increasing U.S. containment of advanced industries and science and technology, concerns about China's economy have grown. Many analyses suggest 'Peak China,' meaning China will not catch up with the U.S. economically due to insufficient new growth engines. Whether this becomes reality remains to be seen. However, population decline leading to an aging society, stagnation in financial and real estate reforms, and unclear responses from the Chinese government are worrisome aspects for China's economy.