Desmond Shum was one of the most connected Chinese businessmen. He and his ex-wife, Duan Weihong, used their connections with top government officials to build a multi-billion dollar real estate development company during the golden age of entrepreneurs starting in the mid-1990s.
Now, tensions with the West are dominating the debate, with Treasury Secretary Janet Yellen sharply criticizing China’s treatment of US companies on a trip to Beijing this week.
Mr. Shom left China in 2015 as Xi Jinping, the country’s leader, asserted greater state control over the country and its businesses. Duane, also known as Whitney, disappeared two years later. (It is believed that the Communist Party officials I held her after the detention of a high-ranking political ally on suspicion of corruption).
Mr. Shum told the story of their rise and fall — and the murky realities of doing business in China — in his 2021 memoirs. Many details could not be independently verified but his role at the intersection of business and politics is certain. He now lives in Britain with the couple’s son (neither of whom has seen Duan since her disappearance) and says it is not safe for him to travel to China.
Mr. Shum will testify next week at the Congress on the challenges facing US companies operating in China. This conversation has been condensed and edited for clarity.
What has changed since you published your book?
First, the view of China has become more negative. Covid has had a lot to do with it, particularly in changing the views of the general public. And that helped speed things up in terms of how policymakers deal with China — they now have their ebbs and flows.
Second, the outside world underestimates how badly the Chinese economy has deteriorated. Many things struck me in the conversations I had with business people in China. A large dairy company is producing more milk powder because people are holding back on buying milk. This is usually one of the last things you will cut.
Many executives also say employees have been blatantly stealing from companies since the pandemic. Why? They have given up hope because the economic outlook is so bad.
How does this affect governance and business?
It adds to the growing insecurity of the Chinese Communist Party, so the government is tightening censorship using the measures it introduced during the pandemic. It affects business: raids on due diligence firms with Western connections and restrictions on access windsa Chinese data provider, is part of an effort to control foreigners.
How do global companies adapt?
Companies are dramatically reducing their exposure. People talk about “de-globalization”, but the appropriate term is “re-globalization minus China”. You wouldn’t have one country replacing China, but operations spread to Vietnam, Indonesia, Sri Lanka, India and other places. Look at how many Taiwanese manufacturers are moving to Mexico on a massive scale. Hence you have friendships and closeness in Europe.
Do the US messages – tough talk while also saying it wants to maintain dialogue – complicate matters?
After four years of Trump and three years of Biden, you see general consistency in China policy. A slight change or difference in tone will not affect China’s perception that the United States views it as defined. They need some stress relief in order to revive confidence in the business and bring in more capital. If they can mitigate or delay US measures, they want to do so.