Xi’s Grande Vision For U.S.-China Relations Runs Through Starbucks

On Thursday, January 14, Xinhua published a letter from Xi Jinping to former Starbucks CEO Howard Schultz, calling on Schultz to encourage the development of U.S.-China ties. Xi’s public letter to Schultz stands in marked contrast to the recent treatment of Chinese entrepreneurs such as Sun Dawu and Jack Ma; the former is in jail and the latter is free but “lying low.” CGTN, a Chinese state media outlet, reported on the details of Xi’s surprising message to Schultz:

Chinese President Xi Jinping has written back to Howard Schultz, the chairman emeritus of Starbucks, encouraging him and the company to play a positive role in promoting China-U.S. economic and trade cooperation and bilateral relations.

Xi stressed in the letter that under the leadership of the Communist Party of China (CPC), 1.4 billion Chinese people have made long-term and arduous efforts to complete the building of a moderately prosperous society in all respects and achieving socialist modernization.

China will embark on a new journey to fully build a modern socialist country, which will provide a broader space for companies from all over the world, including American companies such as Starbucks, to develop in China, Xi said. [Source]

At CNN, Michelle Toh revealed that Schultz had previously sent Xi a copy of his latest book:

According to a person familiar with the matter, Schultz recently sent the Chinese president a translated copy of his latest book, “From the Ground Up: A Journey to Reimagine the Promise of America.” The correspondence included a letter to Xi, which pointed to Starbucks’ longstanding commitment to China and its employees there, the person added. [Source]


It is unclear what message Xi intended to send by publicly responding to Schultz, although it is not unprecedented for Chinese leaders to send international messages through their interactions with the CEO. In 2006, Hu Jintao joked about Starbucks Coffee at a dinner with Schultz present, ostensibly signaling China’s openness to American businesses. In April 2012, during the aftermath of the Bo Xilai scandal, former President Jiang Zemin met with Schultz to signal that he had survived an internal purge. One Chinese observer tied Xi’s message to the Ministry of Foreign Affairs’ recent praise of Henry Kissinger’s “diplomacy” and Elon Musk’s “objectivity.”  Musk’s Tesla, an electronic car manufacturer, has built a massive factory in Shanghai, which tech blog Pingwest has described as a “giga-sweatshop.” Musk’s close relationship with the Party was the focus of a recent Bloomberg article profiling Tesla’s China business. Matthew Campbell, Chunying Zhang, Haze Fan, David Stringer, and Emma O’Brien report for Bloomberg News:

[Musk] then went to Beijing, his every move tracked on social media by Chinese fans, many of whom were charmed by his decision to dine at one of the city’s better-known hot pot restaurants. The highlight of the trip was an audience with Premier Li Keqiang. “I love China,” Musk said as they met, providing a soundbite that would be distributed enthusiastically by state media. It quickly became clear that China loved him back, and not only because Li replied that Musk might be granted permanent residence.

[…] The reorganization also increased the power of Grace Tao, a former correspondent for state-controlled China Central Television who leads communications and government affairs. Tao made little secret, the employees say, that her priority was to ensure Tesla retained support from the top echelon of the Chinese state. She hung a large organizational chart depicting the upper reaches of the central government and senior officials in key provinces—critical Kremlinology in modern China. According to the employees, she’s said that if she wants to get a message to Xi, she need only go through one intermediary, which would be an astronomical level of access in China. (The Tesla representative denied that Tao has ever made this claim.)

[…] If that evolution occurs, the closeness of Tesla’s Chinese operations to the state won’t help the company. In late September a Chinese blogger broke the news of an upcoming Model 3 price cut. He was soon visited by police who instructed him to delete the post. Tesla demanded that the blogger reveal his source, then announced not long after that a logistics manager had been fired for leaking confidential information and was being investigated by law enforcement. (Tesla’s representative said the company reported the leak to police as a “breach of business confidence” and had no involvement in the subsequent investigation.) Meanwhile, a recent Chinese-language company news release emphasized that Tesla’s plans to export Shanghai-made Model 3s to Europe would “contribute to the new development structure of China’s ‘dual circulation’ ”—a direct reference to Xi’s blueprint for making the country more self-reliant and therefore resistant to Western pressure. [Source]


Chinese entrepreneurs face a very different environment. In China Leadership Monitor, Jude Blanchette wrote that “in the new era [clear demarcations between “state-owned” and private] have become obscured to the point of irrelevancy by a concerted effort to expand the role of the CCP throughout the economy, both public and private.” Domestic entrepreneurs have steadily seen their political power diminished, and, in extreme cases, their freedom taken away. In November 2020 Sun Dawu was detained for “picking quarrels,” a “pocket crime” used to arbitrarily detain those authorities wish to silence. Alibaba, the company Jack Ma founded, had its IPO cancelled by Chinese regulators shortly after Ma gave a torrid speech dismissing the knowledge of Chinese banking regulators. The company is now at the center of an antitrust probe. The Financial Times reported that the rift between Xi Jinping and Jack Ma dates back to at least 2016, when, to Xi’s chagrin, G20 leaders sought audiences with Ma during the Hangzhou summit Xi hosted. At The Atlantic Michael Schuman wrote about Xi’s efforts to curtail domestic business leaders’ political and economic power in order to build national “self-reliance”:

Jerome Cohen, a longtime expert in Chinese law, has worried on his blog that these actions could signal “a new central campaign to curb the political and economic power of major private entrepreneurs who refuse to follow the central Party line in every respect.” That rings true based on Xi’s efforts to tighten his grip on private enterprise. In a document issued in September, the Communist Party said it aimed to “guide” private companies to “explore the establishment of a modern enterprise system with Chinese characteristics.” The “opinion” of the party is that its cadres ought to have more influence over the management decisions of private firms, to ensure that they adhere firmly to the correct, state-determined line.

[…] Though Xi has occasionally implemented market reforms—the financial sector has been opened more widely to foreign investors and firms, for instance—overall, he has shown a preference for the very visible hand of the state. His administration has gushed financial aid to a wide range of high-tech industries, including microchips and electric cars. Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, notes that state-owned enterprises are gobbling up a larger proportion of vital resources, such as bank loans, while the share of national output generated by private companies is no longer expanding as it once had. “The surge of the private sector has come to end,” he told me.

[…] Xi could also be motivated by fear and distrust. Since the days of Deng, the mantra of Beijing’s top policy makers had been “reform and opening up,” which stressed integration with the global economy. Xi, however, wants to limit that integration, or at least engage with the wider world on different terms. China, of course, will still sell you all kinds of stuff and happily take your money. But Xi wishes to reduce China’s reliance on other countries, especially potential adversaries such as the United States. From Beijing’s perspective, the Trump administration’s restrictions on technology sales to the telecom giant Huawei Technologies and other Chinese outfits exposed the dangers of counting on untrustworthy foreigners, and Xi intends to ensure that China’s advance can’t be upset by politicians in Washington or elsewhere. [Source]


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