Xi has changed China, Reeves is trying to go back in time

I wrote this for The Times last week. It ran on Sat 11 Jan 25.

Over dinner at Claridge’s in 2023, Henry Kissinger posed an unexpected question: “Should I go to China?” The occasion was to mark his 100th birthday, half a lifetime after he engineered America’s opening to communist China.

The Chinese Communist Party (CCP) always respected the veteran diplomat and the invitation to go east again was from Xi Jinping himself, so Kissinger’s question was largely rhetorical. Of course he should go. But what about others?

Rachel Reeves is in Beijing this weekend. Officially she is restarting the UK-China economic and financial dialogue to bring renminbi trading to London. But the world has changed since Tony Blair initiated the talks. Neither is this the “golden era” that David Cameron and George Osborne hoped would see China become increasingly open.

This is Xi’s China, a Marxist nationalist state that represses minorities at home, covered up the coronavirus until it was too late, supports Russia’s violence in Ukraine and targets British nationals and interests here in the UK. A visit by Britain’s chancellor will be seen by many in Beijing as proof that it can act with impunity, particularly when the demand from the visiting delegation is so nakedly defensive; trying again to bring China’s currency trading to London at a time when the UK debt rates are so high and growth looks so distant.

It’s hard to imagine Kissinger playing such a high card for such a poor strategic goal. Kissinger showed it was right to take risks and speak to enemies so long as such realpolitik delivered his country’s interests. To split the communist bloc — Chairman Mao Zedong’s China from Leonid Brezhnev’s Soviet Union — Kissinger was prepared to risk approbation for engaging with those who had supported America’s enemies in North Vietnam. The result was ping-pong diplomacy.

The story takes in the 1971 World Table Tennis Championship in Nagoya, Japan. Glenn Cowan, an American competitor, overslept and missed his team bus. So he jumped on the next one: China’s. He got talking to a fellow player, Zhuang Zedong, and when they left the bus they were pictured exchanging gifts. It was a token of a more hopeful future. Zhuang went on to win gold in the team event and silver in the men’s doubles. Days later, the Americans received an official invitation to play in China. This paved the way for President Nixon’s historic visit in 1972.

Well, that’s how the story goes. Kissinger had done the groundwork, opening communications two years earlier with his opposite number, Zhou Enlai. Among the first questions they discussed was that of Taiwan. At the time, the island was a major US base for the Vietnam War. The Kuomintang forces who had lost the Chinese civil war and fled to the island were happy to host the Americans to dissuade communists on the mainland from attacking.

Kissinger was keen that US troops should not become an obstacle to his plan and assured Zhou that numbers would fall considerably once peace in Vietnam was signed. But despite rapprochement, Kissinger couldn’t repeat Zhou’s formulation that Taiwan was “a part of China”. Instead, he adopted the line that “we are not advocating a ‘two Chinas’ solution or a ‘one China, one Taiwan’ solution”.

He may not have advocated it, but it has happened. There now are two Chinas. One is open, centred on Taiwan’s capital, Taipei, and used to include Hong Kong and even Shenzhen; the other is closed and centred on Beijing. Rachel Reeves is heading to the wrong one — and for the wrong reasons.

Diplomatic trips to Beijing are especially freighted with symbolism. Sending a senior minister usually signals not continuity but change, an initiative to forge a new future. Yet Reeves appears intent on reinventing a long-gone past. She should instead be engaging with the open China, seeing the future in one of the technological and entrepreneurial capitals of the world beyond the reach of the CCP.

Xi’s nationalist state has turned away from his predecessors’ vision of the People’s Republic. Jiang Zemin and Hu Jintao put the country on a path to global engagement, taking it into the World Trade Organisation and setting out plans for the Asian Infrastructure Investment Bank. That’s now reversed. Xi has increased state control and put the interests of the CCP over the wider economy.

As technology has evolved, he has made the bet that scale, surveillance and command can deliver growth, not the chaotic creativity that turned tech barons such as Jack Ma into rivals to red princes like him. In London, the Chinese ambassador gave me a chilling demonstration of how much things had changed. In 2017, as the new chair of the foreign affairs select committee, I was invited to his north London suburban villa.

Over a fabulous spread, Liu Xiaoming showed he wasn’t interested in taking forward the openness of the “golden era” but in giving a warning. Sichuan spices and Canton textures couldn’t soften the impact of his words as he recounted snippets of intelligence files China’s ministry of state security held on my family. He told us who my mother-in-law had known as a French diplomat in 1960s Beijing and what she had achieved when she returned for six years in the late 1990s, giving colour that went beyond the professional. But he went further, giving details about her education as a pupil of John Fairbank, Harvard’s great sinologist. Liu was making it clear that while they knew her to be a great diplomat, they had been watching her, and us, for many years.

After the committee visited China, where we were hassled and intimidated, we reported that we would not now call this a golden era of relations between our two countries. In response, we got a seven-page rant telling us to obey our government and that I, personally, had disappointed my elder relatives.

This glimpse of so-called wolf warrior diplomacy, named after action movies portraying the People’s Liberation Army as Hollywood heroes, was unimaginable under Zemin or Hu. They followed the Deng Xiaoping policy of “hide and bide” — hide your strength and bide your time. But under Xi Jinping, Beijing’s state agents have grown in ambition.

In the UK, they have attacked protesters, set up illegal police offices in Glasgow and Croydon, intimidated British nationals from Hong Kong and used their own students to silence debate in our universities. Our Electoral Commission and a Ministry of Defence payroll contractor have been hacked. In the Baltic, China’s ships have cut fibre optic cables and severed powerlines. It has become clear what the CCP’s interests are, and they’re not ours.

So should anyone go to Beijing? As one of the world’s largest economies, that is an important question. We have huge commercial interests and an interdependency that demands co-operation, but that doesn’t mean everyone should go. When Cameron went in 2013, he was making a reasonable bet on promoting a more open future at a time of British strength. Reeves betrays a lack of understanding of how the world has changed since then. She could have made a different choice.

Back at Claridge’s, Kissinger asked me a different question: “Have you been to Taiwan?” It’s where this second China is prospering — a democratic, open and innovative society that points to a different path. I will land there tomorrow. The island province was colonised centuries earlier and has been governed by Japan and the mainland at different points. Its now-minority indigenous population of Austronesians went from there to settle Indonesia, Malaysia and the Philippines, even as far as Madagascar and Polynesia.

Modern Taiwan really emerged in 1949 when the communists gained complete control of mainland China and two million refugees — predominantly from the nationalist government, military and business community — fled, along with the imperial palaces’ treasures that now make up Taipei’s National Palace Museum’s astonishing collections. Despite the animosity, the Republic of China, as Taiwan is more properly known, hasn’t declared independence. But its ambiguous status is causing growing tension. Xi has pledged to reunite the country and is building a navy and air force that threatens blockade or even invasion.

Small islands forced to compete with larger neighbours have a history of showing what a difference openness and freedom can make. In the 15th century, Admiral Zheng led China’s greatest fleet across the Indian Ocean with ships that dwarfed anything Europe could build. But after his death, the Ming emperor Zhengtong banned ocean-going vessels entirely. China chose to look inward; its rulers wanted control more than innovation. Centuries of stagnation followed.

China’s moment of humiliation

Into the gap European merchants expanded until they threatened China itself. At its lowest point, in October 1860, British and French troops looted, then destroyed, the Old Summer Palace while forcing China to accept the toxic opium trade. It was a shameful episode in Britain’s history, remembered now in China as a moment of humiliation. Britain’s power wasn’t only based on gunboats but an ecosystem of innovation. Emerging from the medieval guilds, a complex web of relationships between master craftsmen, apprentices and merchants created small workshops that experimented with new techniques, engineers who shared ideas in coffee houses and mechanical institutes.

The state provides a framework of laws and protection but the expertise itself grows from the bottom up. Britain’s industrial revolution let inventors, entrepreneurs and skilled workers — not government directives — transform our world. The semiconductor fabrication plants (fabs) in Taiwan are modern examples of those communities. They now produce more than 90 per cent of the world’s most advanced semiconductors and more than half of the rest. It is an environment where excellence builds upon excellence, centred on companies such as the world-leading Taiwan Semiconductor Manufacturing Company (TSMC), valued at almost $900 billion. But the industry isn’t only the vast fabs — it is the entire ecosystem of innovation.

Universities work closely with industry. Engineers move freely between companies, cross-pollinating ideas. And small companies experiment with new designs and techniques, pushing boundaries, confident they can access the world’s best manufacturing capabilities. TSMC pushes this overseas, working closely with tool manufacturers in Japan and the Netherlands, design companies in Britain and America and research institutes worldwide. The result isn’t only technological leadership but also a resilience that no amount of state planning could mirror.

Taiwan has embraced what the author Nassim Taleb calls “antifragility” — the ability to grow stronger under stress. It succeeds not despite its precarious position but partly because of it. The constant need to innovate, to stay ahead and to build partnerships, has created an ecosystem that turns challenge into opportunity. Beijing is trying to build its own semiconductor industry through huge state investment.

It is repeating the mistake of the French knights at Agincourt, believing that scale and resources alone can overcome systematic excellence. But the CCP sees no alternative. To maintain stability across a vast territory and manage demographic decline, environmental challenges and rising expectations from its population, it feels the need for control, stifling the very innovation that only freedom can foster.

When Beijing launched its Made in China 2025 initiative, it followed the classic pattern of state planning — huge investment, rigid targets and centralised control. The result has been a peculiar mix of impressive achievement and fundamental weakness. It can build the world’s largest network of high-speed rail but it struggles to design the most advanced chips. This was not inevitable. In 1999, a lecturer, Jack Ma, tried his hand at entrepreneurship.

His company, Alibaba hit a record-breaking $150 billion IPO on the New York Stock Exchange in 2014. When he stepped down as chairman in 2019, he was a tech titan and not ready to retire. While planning to sell shares in Ant Group — his new venture, valued at $37 billion — he publicly criticised Beijing’s regulatory system, calling it outdated and stifling to innovation. The IPO was stopped and Ma disappeared for months. Reports suggested that he was placed under “supervision”, a term often linked to house arrest or detention.

He wasn’t alone. The CCP has been asserting control over influential tech companies and their leaders, hitting Alibaba’s stock value and Ma’s personal fortune, demonstrating a shift in Beijing’s approach to managing its private sector. No wonder manufacturing is already shifting to India, the Philippines and Mexico. Xi’s insistence that business serves the state, supports the CCP and knows its place has made innovators keep their heads down or leave the country.

Reeves misremembers golden era

As AI reshapes our world, the ability to innovate is even more crucial than the ability to manufacture. Beijing’s approach to AI development mirrors its broader technological strategy: data collection, state direction and centralised control. But the biggest breakthroughs in AI need trust — that is what fosters open collaboration and free inquiry.

That’s why Reeves should have travelled a little bit further. She is not only misremembering the golden era, she is misreading the entire landscape of tech development in Asia. The vision she is chasing — of state-directed manufacturing and centralised economic planning — already shows signs of strain. The real engine of Asian technological development lies not in Beijing’s five-year plans but in the complex networks of innovation that span Taiwan, South Korea, Japan and beyond.

Could Reeves have gone to Taiwan? It would be hard without being accused of encouraging separatism. But British trade ministers have been, most recently in 2022, and when Taiwan’s digital affairs minister Audrey Tang visited me in London to discuss cyberattacks and defending democracy, I became the first cabinet minister to formally meet a Taiwanese minister.

I was planning to reciprocate and learn more about Taipei’s approach to self-defence, online and off, but the election came early. This isn’t about choosing sides between Beijing and Taiwan — indeed, neither of them seek such a choice. It’s about choosing which model of development we want to engage with, and engaging Chinese entrepreneurs where they’re allowed to succeed.

Britain should look to where technology is going, not where it is punished. That means deepening co-operation with Taipei, while of course maintaining appropriate diplomatic relations with Beijing without summit-level engagement. Reeves isn’t wrong to see the future in China. She’s just looking in the wrong place. It’s not holding court in Beijing’s Great Hall of the People but Taiwan’s semiconductor fabs — a short flight from where our chancellor chose to land.

Tom Tugendhat is a former security minister. He is sanctioned by China, Russia and Iran