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At the Hyatt Regency Hotel in San Francisco on Wednesday evening, the number of important personalities from American business per square meter was extremely high: Elon Musk was there, but also Tim Cook. Pfizer CEO Albert Bourla also paid his respects, as did legendary financier Ray Dalio.

They all came to Xi Jinping and the Chinese president did not disappoint them. “The world depends on China-US cooperation for a better future,” Xi said. “China is ready to be a partner and friend of the US.” The gathered business people thanked him with a standing ovation.

Xi had previously exchanged views with US President Joe Biden. The two had a nice conversation and made small progress in working together. China will no longer supply raw materials for the production of fentanyl, the drug currently responsible for the most premature deaths in North America. The two heads of state also decided that their armies would be able to communicate directly with each other again in the future, clearing up any misunderstandings before something worse happened.

However, the Chinese president really started working with the business elite, and that was no coincidence. The Chinese economy is currently in serious trouble. Even the official figures show this. In 2022, China’s gross domestic product grew by just three percent; in the current year, growth will probably fall below the two percent mark. The renminbi is likely to weaken further and record high youth unemployment is likely to dampen consumer confidence.

Daniel Rosen and Logan Wright summarize the reasons for China’s economic woes in Foreign Affairs as follows: “China’s economic slowdown is mainly caused by the real estate and infrastructure bubble, and that is a self-made problem. The Chinese’s private investment is declining as market opportunities have dried up in the absence of reforms. That is why returns on capital in other parts of the world – including the US – are currently higher than in China.”

Economists debate whether Xi is partly responsible for the economic woes because he is making life difficult for private entrepreneurs like Jack Ma, or whether, conversely, the state has to step in because private entrepreneurs are no longer interested in investing. It seems certain that not only the real estate bubble, but also the cold relationship with the West is influencing the Chinese economy.

Xi Jinping can quickly change his mind

Zongyuan Zoe Liu also states in ‘Foreign Affairs’: ‘Many China experts underestimate the extent of the influence of a deteriorating relationship with the West on Chinese behavior. They consume less and their willingness to take economic risks decreases.”

President Xi can change his mind – overnight if he has to. He abruptly ended his strict lockdown policy when costs became too high. He has also recently adopted a friendlier tone towards the West; he has whistled back at his ‘wolf diplomats’, who are characterized by particularly aggressive behavior.

The fact that the Chinese president has become quieter lately is not only due to the weakening domestic economy. The Belt and Road Initiative (BRI), his ambitious development program with which he has blessed half the world, is also in trouble. China has invested more than $1 trillion in more than 100 countries under this program to date. A growing number of them are no longer able to pay off the debts they have accrued.

This does not only affect Sri Lanka, where highways, seaports and airports were financed by Beijing. Argentina, Kenya, Malaysia, Montenegro, Pakistan and Tanzania – to name just the most important ones – are also suffering from the Chinese debt burden. And the Chinese communists are in no way inferior to the Western capitalists when it comes to collecting these debts. “In many developing countries, China is now seen as a greedy and unyielding creditor, no different from the Western companies that have collected debts in the past,” Michael Bennon and Francis Fukuyama note in “Foreign Affairs.”

The delicate Chinese charm offensive also suits the White House. President Biden already has his hands full with the wars in Ukraine and the Middle East. The last thing he needs now is a conflict with China over Taiwan. He therefore also praised the meeting with Xi. It was “very constructive and productive,” Biden said. And he assured that the US would in no way seek decoupling, a disconnect from the Chinese economy.

“We are competing with China,” the US president continued. “But it is my responsibility to ensure that this competition is handled rationally and that no conflict arises.”

For national security reasons, the Biden administration has strictly prohibited the export of war technology to China. However, the US market remains open to Chinese goods and services.

There is also no room for gloating about the current economic problems. “Rather than lashing out at a devastated China, U.S. leaders should hold Beijing accountable for the foreseeable consequences of its policies while making good-faith efforts to provide the country with opportunities for economic cooperation,” notes Rosen/ Wright op.