October, 2017

I received a call from Alyssa Abkowitz, a journalist with the Wall Street Journal. She wanted to ask me about the Xi Clapping game (measuring how fast and how many times people clap for Xi)launched by the internet giant Tencent that had debuted during the opening day of the 19th National People’s Congress. To kick off the Congress which ultimately would choose who would be China’s leaders for the next 5 years, President Xi heralded in an “Era of National Rejuvenation.”

Most of the western press like the Guardian reportedi that President Xi’s speech went on for three and a half hours or that former President Jiang Zemin looked at his watch numerous times and had to use a handheld magnifying glass to read Xi’s remarks. The Globe and Mail’s Nathan VanderKlippe tweeted that he was trying to “I Spy” how many people were asleep at a photo taken of the Congress.ii

But in my interviews with Chinese and in scanning social media, I found the opposite was true—it was clear there was pride in President Xi’s remarks that China was becoming powerful again and had the leader to carry out that rejuvenation.

I told Alyssa that most of the western media got the story wrong in their analysis of Xi’s speech—rather than be bored of his remarks, Chinese were proud.iii To show support, they played the Xi clapping game where a clip of Xi talking about national rejuvenation was broadcast. Players could then click on the screen repeatedly to applaud. Within 24 hours, the game had been played nearly 1.5 billion times.

The Xi clapping game shows the intersection of Chinese government power, rallying Chinese consumer nationalism and the role of the business community. To show support for the government, Tencent launch a game that got Chinese excited about the direction of the country. To appease and make the government happy, companies domestically like Tencent have always tried to launch products and services that demonstrate their support. Companies that do this tend to profit more and get regulatory supported when needed.

The War for China’s Wallet has shown China’s President Xi Jinping is looking to signal to the world that China has reached a level of power that demands respect and equal billing to western nations that have ruled the world political system since the end of World War II. Although President Xi is not looking to replace the world system, he is looking to increase China’s role in it and will utilize all economic and political means to achieve that—foreign companies that follow Tencent’s playbook will gain the support of both the Chinese government and Chinese consumers.

President’s Xi moves to gain power beyond its borders are really an extension of his political predecessors Presidents Hu Jintao and Jiang Zemin policies to regain the power China felt it had before the collapse of the Qing Dynasty in 1911. The difference is that President Xi has systematized his ambitions through direct initiatives like OBOR. More importantly, China has become an economic superpower and President Xi is now willing to use that economic Wallet to coerce other countries to follow its political ambitions and views.

With the power vacuum left by American Presidents Obama and Trump, China has accelerated its plans to increase power by dangling its wallet as a carrot. Countries are being forced to get closer to China economically and politically or else feel China’s wrath through its economic cudgel.

At the same time, the whole world is now re-assessing its closeness to America. Other countries now realize that future American presidents might continue what they see as Trump’s isolationist policies or the laissez faire policies of the Obama administration. Countries that are in a position to have to make a choice are reverting to back up plans to get closer to China and rely less on America. Regardless of whether Trump or his intellectual cohorts and followers remain in political power, China is presenting itself to be the responsible and, perhaps more importantly, predictable partner which countries, especially those with non-Democracy based political systems, prefer. It is also showing itself as a partner h which can improve your economy and that does not view economic trade as a zero sum game as some of Trump’s advisors seem to believe.

Yet at the same time, there is deep unease in getting too close to China. There remains mistrust by many countries, especially those in close proximity in China, about losing political independence. The War for China’s Wallet has shown that China does not seek allies in the conventional sense, but tries to force countries to follow it through a series of coercive economic techniques to effectively gain what it wants.

The power shift toward the East combined with China’s use of money as a tool to achieve power creates great opportunities for companies whose political leaders cozy up to China as Duterte in the Philippines and Trudeau in Canada have done by moving into the Hot and Warm Partner categories. Real profits are to be made by western companies from President Xi’s OBOR and other initiatives, as we have seen from Honeywell’s example. The Chinese state and Chinese consumer wallets alike are powering the profits of even the largest companies and industries in the world.

Yet, despite all the profits to be made, there is uneasiness with an ascendant China in many quarters. The country forces countries to bend to its political will and ideology or else it will punish it—Hollywood is a prime example. Any actor or studio that makes China the bad guy in a film will be banned as what happened to Richard Gere for his closeness to the Dalai Lama and for his negative portrayal of China in his 1997 movie Red Corner. That is why you see so many movies with Chinese heroes, while the enemies remain North Koreans or Russians. Hollywood is a perfect tale of caution for the world’s companies and countries alike--they make huge profits in China as box office sales there eclipsed America’s in 2015 for the first time, but to continue, the producers must essentially sell their editorial independence.

If it is difficult for a company or sector to withstand Chinese pressure, it is even harder for a single company to adhere to Chinese requests without alienating its home markets. Even Cambridge University Press, the world’s oldest publisher founded in 1534, in August 2017 announced that it had blocked online access to 300 articles that its import agency objected to in its China Quarterly journal. Editors stated that if they had not censored its own catalog, the Chinese government would block access to its entire catalog to Chinese consumers, as it had done to Lexis Nexis previously for not bowing down to censorship requests. Yet protests from the western world hit CUP, with authors and academics like Christopher Balding calling for boycotts until CUP re-posted links to the articles.

It is not known whether CUP will become blocked forever in China or if its journals will remain accessible to the Chinese population after it took its stand. Yet the reality is that CUP cannot stand on its own easily, only governments can push back against China’s growing arm as the sticks of the State are too enormous.

Going forward, countries and companies have to understand the thinking process and viewpoints of both China’s government and consumers, much as countries had to learn about America when it wielded so much influence in the post- World War II era. The ones that do, will see the Chinese Wallet powering profits for the next two decades. The ones that do not, well, will lose out on the world’s greatest growth engine.