China’s crackdown on American companies leaves buyers within the U.S. cautious | 60 Minutes

This is an up to date model of a narrative first printed on Feb. 25, 2024. The unique video could be seen right here. 

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American CEOs used to swoon over China. Its huge pool of customers has been a magnetic draw for many years. But doing enterprise there has develop into so fraught and dangerous – with mental property theft and an expanded espionage regulation used to intimidate the enterprise group – that U.S. corporations have pressed the pause button.

On prime of that, the U.S.-China relationship has develop into contentious due partly to China’s belligerent exercise towards Taiwan and within the South China Sea, the balloon spy incident of final yr, and the checklist goes on.

Making issues worse, the Chinese financial system has hit a wall: export progress is slowing, the nation’s drowning in debt, and youth unemployment has soared.

Getting into China to inform that story is all however inconceivable for many Western journalists.

But, as we first reported in February, when the U.S. ambassador, Nicholas Burns, invited us to return for a go to and an interview, we have been granted visas. We spoke with him at his residence in Beijing. 

Nicholas Burns: More cash is leaving China for the primary time in 40 years than is coming in from American, Japanese, European, Korean buyers.

Lesley Stahl: Now why is that? And how a lot of an issue is that for them?

Nicholas Burns: That’s an actual drawback for this financial system. They have 1.4 billion folks right here. They’ve gotta maintain it rising, and overseas capital is essential. You ask why. I feel there’s been a contradiction within the messaging from the federal government right here in China to the remainder of the world. On the one hand, they are saying, “We’re open for enterprise. We need American, Chi– Japanese companies right here.” But then again, they’ve raided six or seven American companies since final March.

Lesley Stahl: Raided?

Nicholas Burns: Raided. They’ve gone into American corporations and shut them down and made accusations we consider are very a lot unwarranted.

The American corporations embrace Bain & Company and— the Mintz Group, an organization that does due diligence for different corporations which may need to make investments right here, was raided final yr. Five of its Chinese workers have been taken into custody, and so they’re nonetheless there. 

Another agency, Capvision, was raided. Lest the message wasn’t loud and clear, a report about it was placed on state-run tv.

It accused Western consulting companies of espionage and stealing nationwide safety and army secrets and techniques.

Lesley Stahl: They need the funding to return again and so they’re raiding American corporations? And they’re–

Nicholas Burns: Yes. They’ve handed an modification to their counter-espionage regulation and it is written in such a normal approach that it may very well be that American enterprise folks may very well be accused of espionage for participating in practices which might be completely authorized and acceptable in all places else within the world– gathering knowledge to do due diligence to be able to resolve whether or not you need to put money into an organization or kind a three way partnership, proper? 

Lesley Stahl: What do you suppose the Chinese are afraid that these corporations are gonna discover out, these due diligence corporations? What are they worrying about? 

Nicholas Burns: You know, I feel they need to management knowledge concerning the Chinese folks, about Chinese corporations. And so– that I feel is on the coronary heart of the issue with these American corporations working in that sphere.

Ambassador Burns advised us that is simply one of many considerations he hears about.

Nicholas Burns: There continues to be mental property theft from American corporations right here.

Lesley Stahl: Is each American firm afraid of that?

Nicholas Burns: Yes.

All sorts of U.S. corporations started flocking to China within the early Nineteen Eighties after the nation opened to the West underneath then-leader Deng Xiaoping. 

And now, U.S. banks function right here. Walmart has practically 300 shops throughout the nation. Shoppers, right here in Shanghai, should purchase Levi’s, browse in an Apple retailer, and get a caramel frappuccino. 

Nicholas Burns: Starbucks has 6,000 shops in China, 1,000 shops in Shanghai, and so they need to maintain constructing as a result of coffee–this was a tea tradition—

Lesley Stahl: Right, yeah.

Nicholas Burns: –for a whole lot of years. It’s now turning into, not less than with the younger Chinese, a espresso tradition, and—

Lesley Stahl: And they love Starbucks?

Nicholas Burns: They love Starbucks. And I’ll purchase you a cappuccino.

Lesley Stahl: I’ll take one, thanks.

Boeing’s right here. So is Tesla, Pfizer, Chevron, Intel. But whereas some companies are thriving, lots of the overseas corporations are apprehensive concerning the enterprise local weather underneath President Xi Jinping. 

Nicholas Burns: If you monitor China from the loss of life of Mao to the opening of China to the world, we have seen a closing of kinds. We’ve seen a centralization of energy of the Party. We’ve seen elevated repression of the folks of China right here. That’s a really important pattern simply over the past decade.

Lesley Stahl: With Xi.

Nicholas Burns: Under his management.

Part of that pattern contains President Xi’s reversing lots of the market reforms that unleashed China’s financial miracle.

Nicholas Burns:  They’ve been rising over 40 years, the quickest progress price in recorded financial history–8, 9, 10, 11% progress charges. They’ve lifted 800 million folks out of poverty. But what’s taking place is that progress price is slowing down. Most economists at the moment are projecting [that] they’re going to be at 2, 3, 4% progress, perhaps even decrease within the subsequent decade–

Lesley Stahl: Can they assist their society if it is that low?

Nicholas Burns: That’s gonna be troublesome for them. 

Lesley Stahl: If there was a lot explosive growth– in that case many individuals have been lifted out of poverty, why is he turning away from what labored? 

Nicholas Burns: Well, I feel they have perhaps competing priorities. The authorities right here in China actually needs the financial system to develop, however in addition they have a nationwide safety mindset. They need to management knowledge. They need to–

Lesley Stahl: But that is extra essential, the management, proper? Than financial progress. It appears that approach. 

Nicholas Burns: I feel it is open for debate. You’re listening to, we’re listening to each messages. 

Lesley Stahl: It sounds as in the event you your self do not know the path it is going. 

Nicholas Burns: What I understand right here is that the higher vitality is with these on the nationwide safety aspect of the federal government of China.

Nicholas Burns: Good morning, how are you?

On a prepare journey from Beijing to Shanghai, the ambassador identified that within the a long time earlier than President Xi, China powered its financial system by investing in these high-speed trains, roads, factories, and skyscrapers that mild up Shanghai–the monetary capital of China. 

But underneath President Xi, China misplaced greater than $120 billion value of long-term overseas investments final yr due to the weakening financial system and the harsh authorities techniques, which have left American corporations unsure of the long run there.

Lesley Stahl: There are loads of American corporations right here. Have loads of them simply picked up and left due to this present enterprise surroundings?

Nicholas Burns: You know, that is attention-grabbing, not many. 

Lesley Stahl: Not many. 

Nicholas Burns: Not many.

Lesley Stahl: Why not? 

Nicholas Burns: China is the second largest financial system on the earth. It’s an enormous market. So, a couple of American corporations have left, however most have stayed.

Some American corporations are shifting not less than a few of their operations to Singapore, Vietnam, Mexico. 

Lesley Stahl: But they don’t seem to be leaving China. The market’s so– 

Nicholas Burns: They do not need to go away.

Lesley Stahl: –irresistible to American enterprise folks. It’s gigantic. 

Nicholas Burns: Maybe they don’t seem to be leaving, however they don’t seem to be investing, they don’t seem to be making main investments till they’ll see precisely the place the federal government is headed.

Yet, due to the 1.4 billion potential customers, some corporations, like Disney, are growing their funding.

Shanghai Disneyland loudspeaker: “Welcome to Shanghai Disney Resort.”

It just lately expanded its Shanghai Disneyland that they advised us is flourishing.

Aptar, a $9 billion firm headquartered in Crystal Lake, Illinois, is one other American agency bucking the pattern of capital flight.

President of Aptar Asia, Xiangwei Gong, a Chinese-born U.S. citizen, confirmed us round certainly one of their 5 manufacturing websites in China. 

Xiangwei Gong: We are manufacturing for a number of the largest U.S. brands– really, U.S. client manufacturers.

This manufacturing facility makes the packaging and dishing out gadgets for meals, pharmaceutical, and sweetness merchandise offered in Asia.

Xiangwei Gong: All of our clients like P&G, L’Oréal, Estée Lauder, they’re all right here doing enterprise.

Aptar, in China for practically 30 years, just lately invested $60 million in a brand new manufacturing facility. Xiangwei Gong says even in a slowing financial system, the corporate is doing properly.

Lesley Stahl: American corporations right here, because the Ambassador properly is aware of, are pausing or reducing again on funding, however not this agency. You’re increasing. 

Xiangwei Gong: Well, as a result of we’re right here for the long-term and we consider within the consumption energy of the rising center class. It’s 1.4 billion folks right here. And, think about, for– for instance, healthcare. And the identical with cosmetics and sweetness and beverage. All– all these sectors–packaged foods–these are actually the most important markets. And so– so we’re very assured concerning the long-term. 

Lesley Stahl: What does it say concerning the confidence, actually, within the U.S.-China relationship? It– it appears to say you consider that– that issues will what? I’m asking, get higher? 

Xiangwei Gong: That’s an awesome query for the Ambassador. I consider so, I hope so.

Nicholas Burns: You know, we’ll see.

Actually, Burns says he is cautious of the long run as the elemental rivalry and distrust between the U.S. and China is shaking the arrogance of the enterprise world and has pushed our relationship to its lowest level in half a century.

Lesley Stahl: Is it our best relationship on the earth proper now?

Nicholas Burns: This is crucial, best, and most harmful relationship that the United States has on the earth proper now and can, I feel, for the following decade or so. 

Lesley Stahl: I need to quote you again to you, and inform us what you meant. You have stated, “Divorce is just not an choice.” 

Nicholas Burns: Right. Our two international locations must reside collectively. And this, I feel, is the best rigidity within the U.S.-China relationship. China’s our most important competitor, and on the identical time, China is our third largest commerce partner–750,000 American jobs at stake. Agriculture- China’s the biggest marketplace for U.S. agriculture. One fifth of all of our export ag– merchandise from agriculture are despatched to China. That was $40.9 billion final yr.

Lesley Stahl: So we won’t afford actually to have an actual break right here. 

Nicholas Burns: Well, it is sophisticated.

Lesley Stahl: All these jobs would–

Nicholas Burns: It’s sophisticated. Some persons are saying, “Well, we’re so aggressive with China, we must always finish the financial relationship.” Well, the consequence of that may be 750,000 American households would not be capable to put dinner on the desk. And so this makes for an awfully troublesome balancing act in my job.

Lesley Stahl: You’re a Wallenda brother.

Nicholas Burns: I’ve by no means considered myself that approach, however excessive wire–

Lesley Stahl: But you are up on that tightrope. 

Nicholas Burns: Right. Well, we have– we’ve competing pursuits right here, and balancing these pursuits is the fact within the U.S.-China relationship. We’re gonna compete. We must compete responsibly and maintain the peace between our international locations. But we even have to interact.

One in each 5 folks on the earth is Chinese; China’s inhabitants is 4 instances that of the U.S. and the nation is huge: 3.7 million sq. miles. It overlooks the Taiwan Strait, the place half the world’s commerce flows on daily basis, and is positioned about 100 miles away from Taiwan. 

President Xi likes to say that the East is rising, the West is declining, however economically, the U.S. is flourishing in comparison with China. In December, Moody’s, the credit standing company, minimize its outlook for China to “adverse.” And it is going through a long-term demographic bind: a decline within the beginning price that specialists say is irreversible, that means the nation is each ageing and shrinking.

Ambassador Nicholas Burns took us on a tour, beginning in Beijing. 

The ambassador and his spouse Libby prefer to take early morning walks via a park close to their residence. 

Nicholas Burns: This is a 600-year-old Ming Dynasty park known as Ritan Park. It’s a spot for a lotta retirees and loads of younger folks, and it is tremendously lively. 

It’s the place the locals come for his or her early morning routines like Tai Chi, yo-yo-ing, and ping pong. 

Nicholas Burns: Oops!

You could not inform from these scenes– 

Nicholas Burns: Whoa!

–that China, the place the COVID pandemic started, continues to be rising from the trauma of President Xi Jinping’s oppressive zero-COVID coverage. 

Burns, 68, a profession diplomat who has served in each Republican and Democratic administrations, acquired to China on the top of the zero-COVID lockdowns and quarantines.

Nicholas Burns: When my spouse Libby and I arrived right here in early March of 2022, we have been quarantined on this home for 21 days, for 3 weeks. Shanghai, a metropolis of 26 million folks, was fully locked down for 63 days–

Lesley Stahl: What was– what was that like, within the city–

Nicholas Burns: Well, we had ladies who wanted to offer beginning and we needed to discover a method to get them to the hospital. We had Americans who wished to get out however needed to discover a approach out of their locked compounds to the airport. So, zero-COVID labored for some time. In ’20 and ’21, they’d very low, or comparatively decrease, an infection charges. But by 2022, it had actually divided this society.

It set off uncommon, widespread protests. Then in December of 2022, President Xi ended the coverage abruptly. 

Joerg Wuttke: The very last thing this authorities is gonna settle for right here is volatility.

Volatility is one thing Joerg Wuttke, a German businessman, who’s lived and labored in China for over 30 years, hadn’t seen because the Tiananmen Square rebellion in 1989. He represents BASF, the world’s largest chemical producer. 

Lesley Stahl: You have stated it is a PTSD nation, post-traumatic stress dysfunction nation. What– what do you imply? 

Joerg Wuttke: Well, everyone has been traumatized by the lockdowns that came about in lots of cities throughout China. And the sort of messaging that got here out of the management: “It’s on your personal security.” And then the lockdown was lifted– really it was extra a capitulation from the federal government. The lockdown mainly left. And– and like a tsunami–

Lesley Stahl: They stated, “We have been incorrect. We’re gonna raise it?”

Joerg Wuttke: They by no means stated they have been incorrect. That’s not the system to s– admit that they did one thing incorrect. And then you definitely mainly, like a tsunami, COVID was rolling throughout the nation.

Lesley Stahl: After they lifted it?

Joerg Wuttke: December, January, I might say a billion folks have been contaminated. And actually plenty of folks died. 

Independent analysts say that an estimated 1.4 million folks died. 

Joerg Wuttke: This sort of surroundings actually adjustments your perspective in direction of life. And then enterprise, we thought we’re gonna have a comeback story. And we had a superb couple of weeks. And then the financial system mainly has been flat since. 

Lesley Stahl: You know, after COVID within the West, within the United States notably, we did have an enormous, fast rebound. Why did not it occur right here?

Joerg Wuttke: Well, I feel that COVID additionally has coated up a few long-term issues that China has been build up. For instance, in the actual property sector. 

We reported on the actual property sector 10 years in the past with astonishing sights like this–of empty buildings in metropolis after metropolis throughout the nation.

This is immediately. Similar hollowed-out wastelands of unoccupied and unfinished flats often known as ghost cities. 

Lesley Stahl: When I used to be right here 10 years in the past, I by no means anticipated to see these buildings nonetheless right here.

What was a housing bubble again then grew and at last exploded. This actual property disaster lies on the coronary heart of China’s financial decline. 

Lesley Stahl: Has anyone counted up the variety of empty items, I imply, throughout the entire nation?

Joerg Wuttke: Well, the entire of Germany, we’ve 82 million folks, may transfer in right here immediately, 80– 80 to 90 million flats are empty. 

Lesley Stahl: 80 to 90 million apartments–

Joerg Wuttke: Yes, not less than.

Lesley Stahl: –are empty? 

Joerg Wuttke: Right, unfinished.

Over the years, Chinese banks readily loaned cash to the builders because the constructing increase created hundreds of thousands of jobs and propelled China’s progress. 

But in 2020 the federal government, underneath President Xi, clamped down on the rampant borrowing, inflicting the most important builders to default on their loans and run out of cash. 

Lesley Stahl: Look at that. The facade is not even completed –

Joerg Wuttke: Yeah, yeah.

He says they could not even afford to take down the cranes. In January, Evergrande, as soon as China’s largest developer, was ordered to liquidate its remaining property. 

Left within the lurch are hundreds of thousands of Chinese residents who purchased these flats earlier than they have been constructed.

Joerg Wuttke: The builders owe their clients that paid as much as the magnitude of $1 trillion. 

Lesley Stahl: So, if I did a down fee on certainly one of these flats, will I ever see that cash?

Joerg Wuttke: No, you’ll not see the cash.

Lesley Stahl: It’s gone? It’s vanished–

Joerg Wuttke: It’s gone, it is completed. So, I imply, it is— it is actually dramatic.

Lesley Stahl: Ten years in the past, we have been advised that this was the best way folks put cash down for his or her nest egg.

Joerg Wuttke: Right.

Lesley Stahl: For their retirement fund. 

Joerg Wuttke: Yes.

Lesley Stahl: Is that also the case? 

Joerg Wuttke: 66%, two-third of a household family common wealth is in, in flats.

That lack of wealth has depressed client spending and dragged down the financial system. 

We puzzled if the folks blame President Xi for that or for the COVID deaths. but it surely was inconceivable for us to gauge public opinion, or if it even issues.

While nobody from the federal government would give us an interview, we have been capable of be taught, as Joerg Wuttke–who’s lived right here for 30 years–told us, it is not a good suggestion to wager in opposition to the Chinese folks. 

Lesley Stahl: What are a number of the constructive features of the financial system right here? They do have a powerful manufacturing base nonetheless.

Joerg Wuttke: Well, the large half is absolutely between ears of the folks, the brains of the Chinese entrepreneurs that really made this success story occur. China is just not actually good in fundamental analysis, however they’re implausible in growth. They are world-champion in really making merchandise higher, sooner, and cheaper. 

Lesley Stahl: Are they higher?

Joerg Wuttke: Yes they’re, in some areas. Our Chinese rivals are respiration down our neck and mainly drive a few of us out [of] the market. 

For occasion, China now makes over 80% of all of the photo voltaic panels on the earth, it dominates the wind turbine market, and final yr turned the world’s largest exporter of vehicles, and more–

Nicholas Burns: They’re the main commerce accomplice of twice as many international locations on the earth because the United States, so that they have international reach-

Lesley Stahl: They’re the main commerce accomplice?

Nicholas Burns: With over 60 international locations on the earth. 

And now, with heavy authorities subsidies, it’s quick turning into the chief in electrical automobiles. The carmaker, Byd, is vying with Tesla for the title of best-selling EV maker on the earth.

Shanghai-based NIO is attempting to interrupt via with high-tech improvements. In December, the corporate unveiled a brand new battery with a driving vary of 620 miles, greater than 200 miles additional than Tesla’s top-end mannequin. 

Lesley Stahl: This is— that is good.

William Li: This is our flagship. 

William Li, the CEO and founding father of NIO, says its battery swap know-how permits homeowners to swap out their depleted battery for a completely charged one in underneath three minutes. 

William Li: Exactly it is two-and-a-half minutes. 

Lesley Stahl: Two-and-a-half minutes?

William Li: Two-and-a-half, sure. We already put in 2,200 swap stations throughout China. 

China can also be creating a humanoid robotic business. 

Lesley Stahl: Look at that. 

Alex Gu: After plenty of years, it is coming true.

Alex Gu is the founder and CEO of Fourier Intelligence. 

Lesley Stahl: Hi there.

Last yr he launched the GR-1, his first-generation humanoid. 

Alex Gu: We can do arm, he can swing the arm. Yeah, you see?

Lesley Stahl: Oh, take a look at the fingers. Oh my phrase. Can he play the piano?

Alex Gu: Yeah, future positively it will possibly.

Lesley Stahl: In the long run.

Also sooner or later, he says, the robots may present well being look after China’s quickly ageing inhabitants.

Alex Gu: Maybe we are able to, for instance, we are able to distant management such sort of robotic to assist my grandpa, for instance. Yeah, I feel.

Lesley Stahl: Yeah. 

President Xi, who visited this firm final yr, has known as for the mass manufacturing of humanoids by 2025.

President Xi Jinping, talking Mandarin throughout Dec 31, 2023 speech (English translation): Some folks…with employment and life… 

In his annual New Year’s speech, he talked concerning the nation’s financial woes and, for the primary time, acknowledged the excessive unemployment price. Still, he has laid out a long-term aim of doubling China’s financial system by 2035 and surpassing the West in know-how.

Nicholas Burns: Our corporations and tech specialists are competing on AI and biotech and quantum arithmetic. All these technological advances will result in a brand new technology of army know-how. Our two militaries are vying for army supremacy—who’s going to be probably the most highly effective in crucial, strategic a part of the world, which is the Indo-Pacific.

Presidents Biden and Xi met in San Francisco in November in hopes of re-establishing army communications between our two international locations, which China had minimize off. 

Nicholas Burns: I feel we’re again to a extra settled and secure relationship between the 2 international locations, but it surely’s been a rollercoaster.

The low level, he says, was the spy balloon incident final yr. But there’s additionally been the construct up of army bases within the South China Sea, the rise of air sorties close to Taiwan, and the buzzing of U.S. army planes.

Lesley Stahl: Do you see a reducing of the temperature within the South China Sea?

Nicholas Burns: No, and that is an issue.

Lesley Stahl: You do not? 

Nicholas Burns: And then on Taiwan, following Speaker Pelosi’s go to, we have seen, now for 16 months, a a lot greater price of Chinese each air exercise and naval exercise that is very intimidating, meant to intimidate—

Lesley Stahl: And that hasn’t– they have not pulled again on that?

Nicholas Burns: –the Taiwan authorities. They have not pulled again on that. And I feel finally, they need to develop into and overtake the United States because the dominant nation globally. And we do not need that to occur. We do not need to reside in a world the place the Chinese are the dominant nation. 

Lesley Stahl: When the Cold War ended, all of us thought our system had received.

Nicholas Burns: Yeah.

Lesley Stahl: You know, their system failed, our system rose up. Now he is come again and stated, “No, no, the Communist system’s the proper approach.” I suppose we did not bury that in any case.

Nicholas Burns: You know, it is attention-grabbing to check the outdated Cold War with this time. What distinguishes this time versus the outdated Cold War: Soviet Union had a powerful army and nuclear weapons. It had a really weak financial system, which by no means competed with ours. China’s financial system could be very sturdy. We’re coping with an adversary, a competitor in China stronger than the Soviet Union was within the Forties, 50s, 60s, 70s, and 80s. 

Lesley Stahl: So, if that was a chilly warfare, what are you calling this? 

Nicholas Burns: It’s a contest of concepts, a battle of concepts. Our concept, America’s massive concept of a democratic society and human freedom, versus China’s concept {that a} Communist state is stronger than a democracy. We do not consider that. So, there is a battle right here as to whose concepts ought to lead the world. And we consider these are American concepts.

The newest salvos within the battle for supremacy got here final month when China performed two days of large-scale warfare video games round Taiwan. And President Biden imposed new stiff tariffs, together with a 100% tax on Chinese electrical automobiles.  

Produced by Richard Bonin and Mirella Brussani. Broadcast associates, Wren Woodson and Aria Een. News affiliate, Jessica Langer. Edited by Peter M. Berman.