China Tries to Reboot Its Economy as Competitors Circle
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China is a world powerhouse when it comes to manufacturing and exports. But its economy faces some headwinds. Demand for Chinese goods has slumped, and the country is saddled with industrial overcapacity and heavy debt. And now, punishing tariffs imposed on goods sent to the U.S. and the threat of more to come are further darkening China's economic outlook. In today's episode, we'll hear from two NPR reporters in Asia about responses to China's economic state.

in a few minutes, how Vietnam is trying to capitalize on what it sees as an opportunity. First, China is trying hard to encourage business investment to boost its economy. But as Anthony Kuhn tells us, the pitch rings hollow in a communist state that hasn't always been kind to business owners.

Executives of China's top tech firms applauded as China's leader Xi Jinping and other top officials entered a huge meeting room in Beijing's Great Hall of the People. As the executives sat dutifully taking notes, Xi urged them to serve the country, focus on development, abide by the law, and...

Those who get rich first should promote common prosperity, he said, to make new and greater contributions to advancing China's modernization.

Xi did not tell the executives how to spread their wealth, but he reassured them of the government's support and protection. And that signals a significant policy shift, says Huang Yasheng, professor of global economics and management at MIT's Sloan School. So I think the general background is the private sector has been operating under tremendous regulatory pressures and constraints in the last three or four years.

The most prominent example of China's clipping the wings of its high-flying tech CEOs was Jack Ma, co-founder of e-commerce giant Alibaba. Authorities launched an anti-monopoly investigation into Alibaba in 2020 and suspended the huge stock market listing of its financial arm shortly after Ma made comments critical of China's financial regulators.

Ma moved to Japan, where he kept a low profile. Then he resurfaced at last month's high-profile meeting in Beijing.

And while state media reports did not mention Ma's name or quote any of his remarks, Huang says that just the image of Ma shaking hands with Xi Jinping was enough to signal that Ma had been rehabilitated. It was, Huang says, not a direct message that the crackdown was reversed, but at least the message is that from now on, you're OK. At least one other entrepreneur who fell afoul of the law hopes he'll be rehabilitated, too.

I met him for lunch at a restaurant in downtown Beijing. Gu Chujun was born in a rural area of East China 66 years ago and rose to become, according to Forbes magazine, one of China's richest entrepreneurs around the turn of the century. He built a business empire of dozens of companies, the crown jewel of which was an appliance maker called Kelan Electrical Holdings Company. The local officials thought I did a good job.

Local officials thought that I had run this company very well, and they wanted to take it away from me. They didn't negotiate or say, I want to buy your company. Instead, they tried to arrest me and forced me to sell it. And if I had refused, they would have just taken it. Gu was arrested in 2005 and convicted of embezzlement and fraud. Charges Gu says were trumped up. He was sentenced to 10 years in jail but served only seven.

In 2018, Xi Jinping met with business executives in an earlier bid to reassure entrepreneurs, and the following year, China's Supreme Court cleared Gu of three out of four charges. But they let one charge stand, Gu says, so that law enforcement authorities wouldn't be held accountable for wrongly prosecuting him.

Gu says he was awarded some compensation for his time in jail, but he refused the money because it was a tiny sum compared to his assets which he wants back. For my company shares and 1,300 acres of land, I want $6.8 billion.

It's okay if they only give me a few hundred million dollars, but not giving me a penny would be going too far. China's economic management agency, the National Development and Reform Commission, did not respond to questions from NPR for this report.

Gu notes that China's parliament considered a new law this month that would protect private businesses from officials who try to take their money. If this private enterprise promotion law is passed, I may get some money back. If not, then the law would be useless. As it turned out, though, the law failed to pass this session of parliament. That was NPR's Anthony Kuhn in Beijing.

So as China struggles to convince entrepreneurs to invest in their country, Vietnam is experiencing a manufacturing boom. Many companies want to move their factories outside of China to hedge against the threat of tariffs or other geopolitical risks. NPR's John Ruich went to Vietnam to see the boom for himself.

Two hours by car from the Vietnamese capital Hanoi, a fresh crop of factories and construction cranes rises out of green fields. Three and a half years ago, this was a rice paddy. Now you see a four-lane road. And all the factories in this main road that you see were simply non-existent. Bruno Jaspert runs the company that's developing this industrial zone near the coast in Guangning province.

The firm, called Deep Sea, that's the letter C, has been in business in Vietnam since 1997. In its first 21 years of existence, until about 2018, Jaspert says, it attracted about $1 billion in foreign direct investment. From then till now, we managed to collect another $7 billion. That's $7 billion over just the past seven or eight years. That gives you an idea of how fast it goes.

And I need to point out, we had two years of COVID in that, and the country was locked up. The world's manufacturers have been scrambling to diversify away from China, where U.S. tariffs have raised costs and geopolitics have raised concerns for businesses. Deep Sea has gone from running one industrial zone in northern Vietnam to five. The factories in them make everything from showerheads to Apple Watches.

And a lot of it gets shipped to the world's biggest economy, the United States, now Vietnam's top export market. So the economic relationship has taken off. It's surging. Ted Osius is a former U.S. ambassador to Vietnam. He now leads the U.S.-ASEAN Business Council. Last week, he was in Hanoi with the council's biggest trade and investment delegation ever to visit Vietnam.

It comes 50 years after the end of the Vietnam War and 30 years after the establishment of formal bilateral ties. There's no country in Southeast Asia that inspires more excitement about opportunity than Vietnam. Excitement and some nervousness these days. Vietnam's trade surplus with the U.S. has ballooned, surpassing $123 billion last year, according to official statistics.

It's now number three after China and Mexico on the list of countries with which the U.S. has its biggest deficits. Some fear that puts Vietnam in the Trump administration's crosshairs. So I think it's reasonable to predict that.

that there will be tariffs on Vietnam. And what I'm recommending to the Vietnamese is to be proactive in dealing with the situation. Vietnam's Minister of Industry and Trade made a trip to Washington earlier this month, and U.S. Trade Representative Jameson Greer told him Vietnam needs to improve the trade balance and open up more. Message received, apparently. The Vietnamese authorities announced cuts to tariffs on several U.S. imports this week.

They've flagged possible purchases of U.S. farm goods, gas, and defense equipment. Vietnamese airlines plan to buy hundreds of Boeing airplanes. The government says it's preparing to license Elon Musk's Starlink satellite internet network. And last fall, a Vietnamese property company struck a deal to develop a $1.5 billion golf resort in Vietnam with the Trump Organization.

Deputy Prime Minister and Foreign Minister Bui Thang Son addressed the U.S.-Asean Business Council. On our part, Vietnam remains committed to creating favorable conditions for business, for foreign business and investors, including those from the U.S. The welcome mat does seem to be out. In December, Jensen Huang, CEO of AI chipmaker NVIDIA, came to Hanoi. He was treated like a rock star.

Prime Minister Pham Minh Ching personally took him out for beers in the city's old quarter. Today, several large photos of Hoang and the PM hang prominently on the walls of the bar. And Hoang's visit to Vietnam is a point of pride, says waiter Nguyen Van Sac.

Back at the industrial zone, CEO Bruno Jaspert says this new era of geopolitical uncertainty and rapid change could actually be a good opportunity here. My own personal view is for Vietnam it should be positive. Positive, he says, if they play their cards right. John Rewich in Vietnam. That's the state of the world from NPR. Thanks for listening.

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