China’s trade concerns are likely to increase after the Party Congress, an academic said.

Foreign companies doing business with China are unlikely to get much respite after the much-anticipated Communist Party Congress in October, facing high risks from geopolitical tensions and the Covid-19 pandemic, a prominent Chinese scholar said. Interview today.

“We are in for more tension,” said Bates Gill, a longtime China scholar who recently became executive director of the Center for China Analysis at the Asia Society Policy Institute in New York.

His advice to global businesses and investors: “Proceed with caution as political and geostrategic risks may increase rather than decrease.”

Gil is the author or editor of nine books on China and Asia-related topics, including this year’s Dare to Fight: China’s Global Ambitions under Xi Jinping, Communist Party Secretary Xi Jinping is expected to continue what he sees as nationalism, a threat to the country’s foreign relations.

“Walking out of the party congress will be more of the same and maybe even more of a double whammy of how this leadership wants to talk to the outside world,” Gill said. “At least in the near term – three to five years, this means a further increase in tensions and conflicts between China and some of its key neighbors, at least the United States.”

Gill was previously the Freeman Chair at the Center for Strategic and International Studies in China Studies and the founding director of the Center for Northeast Asia Policy Studies at the Brookings Institution.

Edited quotes follow.

Flannery: Where is America’s relationship with China after Chinese Foreign Minister Wang Yi’s visit to New York and talks here last week?

Gill: U.S.-China relations are at a standstill as of a week ago, meaning the two sides are still at loggerheads and are still in the very early stages of the negotiation process.

The immediate event ahead of bilateral relations is the expected meeting between President Biden and Xi Jinping in November. They are in the early stages of figuring out what that meeting is trying to do. And with the big intervention dynamic between the 20th Party Conference, I suspect there may not be as much bandwidth or flexibility on the Chinese side to advance the negotiation process.

I think the biggest obstacles are the internal political conditions in both countries, which makes it difficult for both sides to deal with the other and maybe try to create a formula that can lay a floor in the relationship or establish it to some extent. A more moderate vote for both sides. But it will be difficult to get that word out. They are still in the early days of trying to figure out what that might be.

Flannery: What are your own expectations for what will come out of the party congress?

Gill: I think we will see more for China’s foreign relations strategy. I suspect that the congress will be to consolidate and celebrate the new powers that Xi Jinping will have. The control over the propaganda elements, at least from an external point of view, puts him in a stronger, more powerful and more confident position. It will be only analysts and pekinologists to try to find cracks in that facade and guess at one appointment or another. This may indicate that Xi’s propaganda apparatus is not as powerful as the propagandists believe.

Flannery: How would you say the style and content of this leadership has changed over time, and what can we expect from him in the future? They explore some elements of that in “Brave to fight.”

Gill: If anything, what we’ve seen is an increase in confidence, an increase in risk, and an increasingly nationalistic stance. I think they were born with two things. One is the confidence in power and the feigned support it finds within the party, which gives it the power and authority and resources to take on more dangerous, decisive and national issues.

Second, it was born out of the calculations he and his supporters had arrived at. While this more assertive, nationalistic, self-reliant stance is clearly dangerous and increasingly difficult, they are seen as riskier than taking this approach to their international relations. Relations with the United States are not good; Over the past 10 years, almost all of China’s major international relations have not improved – in fact, they have worsened. Perhaps the most obvious, but very dangerous, is the relationship with Russia.

So I conclude that what we will see coming out of the party congress will be more of the same and perhaps more double-edged in the way this leadership wants to interact with the outside world. At least in the near term – three to five years, this means a further increase in the possibility of competition and conflict between China and some of its key neighbors, not least the United States.

Flannery: What are some of the takeaways from your book for foreign companies doing business with China?

Gil: Proceed with great caution. I think China is going to be concerned not only with the macroeconomic indicators and potential economic challenges that China is facing, but also with how foreign investors are treated politically in China. I think there will be a third party threat as well. As long-standing companies with China and the overall strategic relationship with it continue to move in a worrisome direction, companies may (easily) take political pressure to reduce or negotiate with China, or perhaps go further. Economic sanctions in there (from their own governments).

I guess there are sanctions and other blacklisting-like actions and they can be more severe. Exercise due caution because of political and geostrategic risks that may increase rather than decrease. I think we have entered a period of heightened tension.

Flannery: America and China are working for influence and friendship across the Pacific and Asia. Where did you see it come from?

Gill: We are entering a new era of great power competition in this part of the world, and perhaps an unlikely competition for many countries in the region, especially the smaller Pacific island nations. Few are good at trying to play a diplomatic game where they can get the most out of both. Some will be successful at that; Others maybe less.

But (moving it) definitely adds up. Both the United States and China have indicated in their own ways that this region will become increasingly important.

I question the commitment of the United States—political, economic, influence, and relations with many countries in the region—and the enormous amount of investment it can afford to do so. And efforts on the part of China.

We’ll just have to wait and see. It is critical that the United States and its allies become more involved, opening new embassies, for example, through political leadership, meetings, and economic investment.

But at the end of the day, China often has more weapons than the United States. Washington simply cannot use the same government-led economic investment. At the end of the day, that will largely be a private sector decision (for America). The US government can provide development aid and some infrastructure support, the real money must come from the private sector. This is even more difficult for the United States. The US government has a tougher time than China directing private investment into these types of regions. In many ways, that means that, in this region at least, our influence arises from other things.

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@rflannerychina