Good morning.
The latest edition of The Economist carries a provocative headline that reads “Peak China.” It’s an interesting concept. Western cognoscenti have assumed for three decades that China would someday pass the U.S. as the world’s leading economic power. But events of the last couple of years have clouded that view. Part of it is decisions by the U.S. to ring fence Chinese technology—one of the few U.S. policies that has bipartisan support in Washington. But even more of it is due to decisions made in Beijing—to rein in successful global tech companies like Alibaba, to stick to a COVID-zero policy and then suddenly abandon it, and to seemingly side with Russia in the Ukrainian war while continuing aggressive moves around Taiwan.
It’s the posturing around Taiwan that has spooked Western business. Most big companies with investments in China have war-gamed what to do if such an invasion occurred. And as a result, many are now cutting back their China exposure.
In our new poll of Fortune 500 CEOs, we asked them which of the following three statements is true for their organization:
1. “We are reducing our exposure to the Chinese market because of concerns about political and reputational risk.”
2. “We are increasing our exposure to the Chinese market because of the business opportunity.”
3. “Our company is not involved with the Chinese market in a significant way.”
Forty-one percent answered No. 1, while only 20% answered No. 2 and 39% No. 3. That means companies with China exposure are now, by a factor of greater than two to one, trying to cut back. And their desire is only increasing over time: that 41% was 35% last year and 23% in 2021.
Divorce won’t be quick. Many Western companies have spent decades sourcing their manufacturing goods from China and increasing their investments there. Rebuilding supply chains and unwinding investments will take time. But it’s one more reason to think the 21st Century may not be the Chinese century after all.
We will be reporting more results from the Fortune 500 CEO poll in the weeks to come.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
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