«For the red aristocrats, an open society was never in the cards»
Desmond Shum, zvg.

«For the red aristocrats, an open society was never in the cards»

Desmond Shum and his wife rose in the Chinese state-controlled capitalism and became hugely successful entrepreneurs – until one day, she disappeared. He talks about what happened to her, the power of the Communist Party and why the West needs to rethink its view on China.

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Desmond Shum, ahead of the Winter Olympics in Beijing, several governments have announced diplomatic boycotts. Does that hurt the regime?

In terms of reputation, yes. These boycotts are a reflection of what has happened in recent years. Since Xi Jinping came to power in 2012, China’s global standing has declined dramatically. A recent survey by Pew Research has shown that people in many countries around the world now have a much more negative perception of China than five or six years ago. European countries in particular used to have quite a favourable view of China; now the citizens of almost every country have a negative view.

How should Western governments deal with China and its human rights violations?

First of all, countries need an internal consensus on whether they see China as a competitor or as an enemy of Western democracies. You can work with a competitor, but with an enemy, things are very different. At the moment, the US is seeing China more as an enemy, whereas Europe is in between the two. But the politicians who don’t want a decline in trade and investment are not willing to see China as an enemy.

The disappearance of Tennis player Peng Shuai, who had accused former premier Zhang Gaoli of sexual assault, has led to an international outcry. Were you surprised by what happened?

No, this is the typical way the regime reacts to a situation like that. In China, if you achieve the position of a minister and above, you are in a class of untouchables, even if you have, like Zhang, retired. People in that class are generally beyond reproach, except for political power struggles. Sexual exploitation is very, very common in the Chinese political system, because political power trumps everything. The party sits above the judiciary. Therefore, the judiciary is not going to investigate the allegations. What happened to Peng Shuai is also typical. If you voice accusations like these, the first reaction of the Chinese Communist Party (CCP) is to silence you. They delete you on the internet and they physically control you so you’re not going to make more noise. It was only because of the international attention that Peng appeared on the media. Maybe she will not disappear physically, but she will disappear from public media.

In general, why does the regime make people disappear?

There are several possibilities. One is that you are inconveniencing the system. You’re not committing a crime, but you’re inconvenient, so the party takes you away. The second possibility is that they want you to admit to a crime. You have not committed it, but until you admit to it, they won’t let you go. The third possibility is that they want you to implicate somebody else. Actually, the act of making a person disappear is an act of psychological warfare: They keep you in solitary confinement, they conduct brainwash sessions, you have no contact to the outside world, and there’s no time limit. If you get a prison sentence, even if it’s ten years, you can count the days until you will get released. But if you are held captive, you are completely at the discretion of the captor. Sooner or later, most people lose hope.

You’re ex-wife Whitney Duan was kidnapped by the regime and disappeared for four years. Who is she?

Whitney comes from a very modest background. She made it to university and became a successful businesswoman. What changed her life – and mine – was the acquaintance of and association with the wife of then premier Wen Jiabao. We became their business partners. I believe that’s the main reason she’s been taken away by the state.

How did she disappear?

One day in 2017, she just disappeared off the street and was gone. The same day, three of her colleagues were taken away as well. They were released after three years of captivity, they had never been charged.

And what happened to Whitney?

Last September, four years after her kidnapping and two days before my book came out, she called me on the phone. She pleaded with me to call off the publication, suggesting that something might happen to her or to our son if I didn’t. It was definitely a shock to me. I didn’t expect such a swift response from the Chinese state.

What was your reaction? Did you fear the publication could hurt her or someone else?

Well, when I started the book in late 2019, I was hoping it could do something to help her. My thought was: She has been gone for two years, what worse can happen? I didn’t even know whether she was alive or dead. And I sticked to the decision to publish the book.

Where is Whitney now?

She is back in her apartment, but she seems to have limited freedoms. I haven’t talked to her again. There’s a limited number of people she can communicate with, and she definitely cannot leave China.

Do you fear for your life?

So far, I didn’t personally get a reaction from the state. I don’t know what will happen. I just continue my life as I did. I mean, if the CCP decides to do something, there’s nothing you can do. So when I decided to publish the book, I resigned to fate.

The book describes your career as successful entrepreneurs and investors. How did you get there?

I was born in Shanghai, my family moved to Hong Kong when I was ten. I went to college in the US. After graduation, I started working for an American Private Equity firm in Hong Kong and, from 1997, in Beijing. My life changed when I met Whitney. Our marriage and our association with the wife of the Chinese premier set us on a different course. The rise of my career mirrored the rise of China. In the 1990s, the country really started to take off economically. Back then, nobody could possibly envision that China would become the second largest economy in the world, building some of the tallest skyscraper. It’s a dramatic rise.

How does business work in a system that is formally still communist and where the economy is under the tight control of the state?

Part of the legacy of the communist state is the role of political power. In China, everything is about political power. To do business, you need to have an association with the political system. Even if you run a small convenience store, you need relationships, maybe to the cop in your street. The bigger the business, the higher you need to reach for political sponsors.

In 2001, China joined the WTO. You expected, like many in the West, that economic liberalisation and growth would lead to more political freedom. Why was this hope not fulfilled?

At the time, we felt there was a period of unprecedented freedom and a breath of fresh air in Chinese society. Economic exchange with the world increased. I still remember the excitement when Vogue was sold for the first time in Beijing. Everybody believed that we would become more like Western democratic societies – the only discussion was about the pace of that change. Now I realise that many people, including myself, were naïve. For the red aristocrats – the descendants of the communist elite that took over power in 1949 –, the open society we expected was never in the cards. The red aristocracy is very closed, their members go to different schools than the rest of the population, they often marry among themselves, and power is handed down from one generation to the next – Xi Jinping is the son of a first-generation communist leader. Why would they want change? Why would they want to give up power?

Was there a specific point when you saw that the country was going in a different direction than you had hoped?

What really changed my view was the financial crisis. The Chinese leadership said: Look, the West is not doing that well, while we have sailed through the storm relatively unscathed. The behaviour of the regime started to change. I saw a party apparatus installed in my company. Ministries changed approval processes for private enterprises. State enterprises took back areas that had been conceded to private enterprises.

Do you think the authoritarian trend in China will continue?

The authoritarianism of the CCP was always there. But now, it is transforming more and more from an authoritarian into a totalitarian model. Look at how the regime is monitoring the population, with hundreds of millions of surveillance cameras installed across the country. Look at how they are monitoring all discussions online, even private ones. This is a totalitarian system.

You grew up in Hong Kong. Can democracy be saved in the region?

Democracy in Hong Kong is gone already. We’re seeing more than ten thousand people being arrested and sentenced to years in jail for attending a demonstration.

Was Beijing ever committed to the “one country, two systems” model?

If you look at the history of the CCP, it has made many different agreements and hardly kept any one of them, starting with the ceasefire with the nationalists in 1945 during the civil war, which the CCP broke before taking over the country. In the 1950s, it made an agreement with the members of the entrepreneurial class, promising that they could keep their private property before expropriating them. The CCP also never really honoured the WTO agreement. The breach of the “one country, two systems” principle is no exception.

Many observers fear that China could attack Taiwan in the near future. What is your expectation?

The intention of the CCP to take over Taiwan has always been there in the last 70 or 80 years. What has changed is that China now has more and more military capabilities which makes the realisation of that intention more likely. And with Xi Jinping, China has a leader that seems to be more willing to take risks internationally.

Many western companies are eager to invest in China and participate in the country’s economic rise. Do you think that’s wise?

As I said, Western countries have to make up their mind about whether they are dealing with a competitor or an enemy. Of course, China is now the second largest economy, so the temptation is there to do business with China – if you put moral and political considerations aside. However, after 30 years of business experience in China, I want to raise the question whether China hasn’t already peaked economically. Most people make the assumption that the Chinese economy will continue to grow at the same pace and overtake the US in the next five or ten years. That’s not a valid case today. The high rates of growth have gone. You have to keep in mind that political power trumps everything. Look at the tech industry: The government’s recent clampdown has wiped out two trillion dollar worth of market capitalisation of Chinese tech companies. This makes the calculation for investors in China very different.

What’s the most important misunderstanding of China in the West?

There are a lot of misunderstandings, but if I have to choose one: The political system of China is something the public and politicians in the West have very little understanding of. They often project how China reacts based on their own experience and background. But it’s a completely different system. And the Chinese regime has an intense interest in changing the behaviour of other countries. It has started a trade war with Australia because the Australian government has called for a formal investigation of the origins of Covid-19. Next, China might say: We have a candidate for the new UN general secretary, and anybody not voting with us will be punished. This is an issue countries cannot avoid, because it is coming to them.

Switzerland has recently experienced this. Last spring, the Chinese ambassador harshly criticised the government for its new China foreign policy strategy because it briefly mentioned human rights.

This is what I mean: They want to change your behaviour. Switzerland is a true weakling in dealing with China, looking the other way of the regime’s aggression for business interests.

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