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Sweden must develop a relevant China strategy

The Swedish government and parliament must be able to analyse and understand what it is that drives China´s continued development, writes business lawyer and former SwedCham chairman Thomas Lagerqvist.

TEXT: Thomas Lagerqvist
15 MARCH, 2018

Winston Churchill said in a radio broadcast in October 1939: “I cannot forecast to you the actions of Russia. It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. That key is Russian national interest.”

Today you can say the same about China.
China is getting richer, older, more urbanised and better connected (although only within China and under tighter control). China is getting more complex politically (within the Communist Party itself).

China is becoming more powerful and more assertive economically and geopolitically. And it is becoming less enamoured of foreign investors and more focused on building Chinese champions that will successfully compete on a global scale.

China uses its “soft power” to affect others by attraction and persuasion rather than the hard power of coercion and payment. Remember the 500 Confucius Institutes and 1,000 Confucius classrooms that China supports around the world to teach Chinese language and culture.

Sometimes the soft power crosses the line and becomes “sharp power” because China also commands a comprehensive and flexible influencing toolset, ranging from the overt to the covert. The Economist raised a red flag in a recent cover article: “Even if China does not seek to conquer foreign lands, many people fear that it seeks to conquer foreign minds.”

And because China is so integrated into its economic, political and cultural life, the West is vulnerable to such pressure.

Since President Xi Jinping came to power, he has introduced what is now generally called Xi Jinping´s Thought, enshrined as part of party dogma together with the thought of Mao Zedong and Deng Xiaoping.

Xi Jinping’s Thoughts are founded on an overall strong vision. To fulfil the “China Dream”, this vision will serve as a guiding star into the new era. However, that said, it is “just” a vision. So, as the old English proverb goes “The proof is not in the pudding. It is in the eating of the pudding”. This means that we will have to wait and see when and how it materialises.

In the meantime, we urgently need corporate headquarters in Sweden and Swedish politicians to increase their understanding of how these new concepts and vision can translate into more concrete business opportunities from a Swedish point of view, including the Belt and Road Initiative and Chinese direct investments into the EU. How can we prepare for change?

Firstly, the Swedish government offices must launch a China desk with at least three or four people who are knowledgeable about and experienced in understanding China, its drivers, policies and vision, and at the same time are in tune with Swedish companies’ needs and aspirations for the Chinese market. Only then will there be a real opportunity for a more China oriented dialogue between business and politics and an ongoing dialogue to ensure that business and politics are synchronised when it comes to China with the aim of clarifying the respective roles we play for the benefit of “AB Sweden” (Sweden Inc).

The Swedish government, parliament and related departments must be able to analyse and understand what it is that drives China´s continued development. There is a lack of transparency in how the vision will be implemented. We need to understand more in depth how China may affect everything from the global economy, to the rules and systems our global organisations (such as the UN) follow, global trade and investment and geopolitics.

After all, what China is currently offering is perhaps a new world order. Who knows?

China has so far proven that it is good at finding new ways and models to engage with the world, all with distinct “Chinese characteristics”.

One example: there has long been overconfidence that China will become more democratic as a result of its continued economic development and emerging role in a globalised world. It is time to realise that this will not happen. President Xi Jinping himself has clarified that “China is a country with a land area of more than 9.6 million square kilometres and a population of 56 ethnic groups. Whose model should we copy? And who is qualified to throw their weight around and tell us what to do?” What he offers is a “socialist, consultative, democracy”.

Similar expressions are currently being used in China´s policy parlance. Examples include a “Socialist market economy” and “Socialist rule of law with Chinese features”. By using the word “socialist” China has given itself exclusivity on how, in practice, it wants to interpret what such expressions should mean to China. And then Xi Jinping can say again, “And who is qualified to throw their weight around and tell us what to do?”

There has long been overconfidence that China will become more democratic … It is time to realise that this will not happen.”

Secondly, it is critical that the Swedish government actually develops a coherent and relevant China strategy. We need to have a well devised and strategic official attitude on how to deal with China, generally, as well in support of the various business challenges that China´s non-tariff trade barriers offer to our national champions. We need to have firm and relevant understanding, initiatives and bilateral support from the government to help our future national champions, the SMEs of Sweden, to conclude more concrete business in and with China, with reduced risk.

But we are not looking for a “strategic document” in itself. I agree with Dwight Eisenhower, who said: “In preparing for battle I have always found that plans are useless, but planning is indispensable.”

The most critical is the planning process itself because that will force the government to increase its understanding – and on a more conceptual level too – of China´s influence on “AB Sweden” and its various players.

We need to have firm and relevant understanding, initiatives and bilateral support from the government to help our future national champions …”

Governments who fail to understand the drivers of China´s development, its course and the “codes” behind China´s visions and catchphrases will not be able to deal with them in the most optimal and proactive way, but will be forced to react, and then it may be too late. I believe that Swedish business generally expects our government to be knowledgeable enough to be able to play its role in support of “AB Sweden” and our future.

I conclude by quoting Confucius: “To know what you know and what you do not know that is true knowledge.”

I rest my case. Thank you.

Thomas Lagerqvist is a senior adviser of the Stockholm office of Mannheimer Swartling law firm. Lagerqvist has been a business lawyer for more than 40 years. Over the past 30 years he has been focusing on China, with 20 years spent working from offices in Hong Kong and Shanghai. He is the author of a number of articles and books on China-related matters.

Lagerqvist served as chairman of SwedCham Hong Kong between 1996 and 2011, when he was elected Honorary Chairman. In 2011 he was elected chairman of the Sweden-China Trade Council.