Desmond Shum was one of China’s most well-connected businessmen. He and his former wife, Duan Weihong, used their connections with top government officials to build a multibillion-dollar property development company during a golden age for entrepreneurs starting in the mid-1990s.
Now, tensions with the West dominate discussion, with Treasury Secretary Janet Yellen sharply criticizing China’s treatment of American companies during a trip to Beijing this week.
Mr. Shum left China in 2015 when Xi Jinping, the country’s leader, asserted greater state control over the country and its businesses. Duan, also known as Whitney, disappeared two years later. (It is believed that Communist Party officials stopped her after a senior political ally was held on suspicion of corruption.)
Mr Shum told the story of their rise and fall – and the murky reality of doing business in China – in his 2021 memoir. Many details cannot be independently verified but his role at the intersection of business and politics is certain. He now lives in the UK with the couple’s son (none of them have seen Duan since she disappeared) and says it is unsafe for him to travel to China.
Mr. Shum will testify next week in Congress on the challenges for American businesses operating in China. This conversation has been condensed and edited for clarity.
What has changed since you published your book?
First, the perception of China has become more negative. Covid had a lot to do with it, especially in changing the views of the general public. That helped speed things up in terms of how policymakers deal with China – they now have a tide to ride.
Second, the outside world is underestimating how badly the Chinese economy is deteriorating. Several things shocked me in conversations I had with businessmen in China. A large dairy company produces more milk powder because people buy less milk. Usually this is one of the last things you would cut out.
Many executives also say that staff have been openly looting and stealing from companies since the pandemic. Why? They have lost hope because the economic outlook is so bad.
How does this affect management and business?
It adds to the growing insecurity of the Chinese Communist Party, so the government is tightening control with measures it introduced during the pandemic. That affects business: Attacks on due diligence firms with Western ties and restrictions on access to windChinese data provider, is part of an effort to control foreigners.
How are international companies adapting?
Companies overwhelmingly reduce their exposure. People talk about “de-globalization”, but the correct term is “re-globalization minus China”. You won’t have one country replacing China, but operations spread to Vietnam, Indonesia, Sri Lanka, India and elsewhere. Look at how many Taiwanese manufacturers are moving into Mexico on a large scale. And then you have amikshoring and nearshoring in Europe.
Are the messages from the US – talking tough while also saying it wants to maintain dialogue – making things difficult?
After four years of Trump and three years of Biden, you see a general consistency on China policy. A slight change or variation in tone will not affect China’s perception that America’s view of it is fixed. They need some easing of tension to revive business confidence and bring in more capital. If they can mitigate or delay US measures, they want to do so.