➀ Foreign investors have put China on pause.  Portents for a second Cold War between the U.S. and Russia and China have spooked investors, who are also disturbed by China’s recent domestic and international behavior and unsure what will happen to the Chinese economy after President Xi Jinping secures a third term, said Okun, who has worked in Singapore since 2003. “Geopolitical risk is off the charts right now and businesses are contemplating things they never had to contemplate before,” Okun said. Some countries have paused making new investments in China and some began pulling back even before COVID-19 and certainly since the zero-COVID policy created massive lockdowns.

➁ Manufacturing in China for the Chinese domestic market will continue, for now. “The pullback is you had all your eggs in the China basket. Now you’re going to stay in China to manufacture for China, but you’re going to pull to Vietnam or to Thailand or Malaysia…” said Okun, who is also the chair of the Asia Pacific Council of American Chambers of Commerce (APCAC) He foresees more dual sourcing – for example solar companies may use polysilicon from sanctioned Xinjiang to make solar panels for sale in China, while moving the polysilicon to another Chinese location that is not under US sanctions to make solar panels for export. But such dual sourcing may not satisfy EU customers who do not want Xinjiang inputs in their supply chains no matter where the goods are manufactured, he said. Still, moving manufacturing from China to Southeast Asian countries will require huge infrastructure investments that simply won’t be affordable for some companies, he said.

➂ No Western companies have pulled out of China as they have from Russia – but they are worried. “Russia commits all of these war crimes in Ukraine. It is untenable to be in Russia, from either a sanctions perspective or because your employees or your customers don’t want you there, so you just pull out and you lose. You don’t care how much money you leave on the table,” Okun said. For the first time, businesses are starting to contemplate this possibility for China, he said.

➃ The U.S. (and journalists) should focus on the “VIP” countries: Vietnam, Indonesia and the Philippines, the American Chambers of Commerce in the Asia Pacific has been arguing to the Biden administration and Congress. Beijing is focused on the “CIA” countries, China, India and ASEAN. The U.S. should instead double down on engagements in the large VIP countries where American economic, geopolitical and military interests coincide, says Okun. “Vietnam, Indonesia, Philippines, because these are the countries that are … large enough where they can have both an export market and a domestic market. They have a demographic dividend that is going to pay off. These are not aging countries like China, like Japan… And they sit in the place where you have the greatest competition, I would argue, between the U.S. and China because you have an area which is militarily important.” Friendly relations with the nations in the Indo-Pacific Economic Framework (IPEF) will be critical, Okun said.