Xi Jinping has managed to staunch the outflow of corporate wealth.

The increasingly dire state of the Chinese economy is driving an unprecedented increase in capital flight. Much of this is illegal, and hence invisible and largely unreported; but enough evidence can be gleaned to build a worrying picture. It seems that Xi Jinping has managed to staunch the outflow of corporate wealth.

But he cannot prevent the exodus of high net worth private individuals now moving billions of dollars abroad by covert means, including shadow banking. Some 15,000 super-rich Chinese are predicted to leave the PRC this year for havens such as the Gulf or Japan, a substantial increase on last year. What does this haemorrhage of private capital tell us about China’s stability and security and how it bears on our own?

The Chinese Communist Party Standing Committee launched a series of more than 300 economic reforms to tackle economic stagnation. Recently the PRC Ambassador to the US hailed this as a “landmark event” that would help deliver Xi’s vision of China as a prosperous, innovative and influential world leader by 2029. However, even if all the Plenum’s measures are implemented, which they will not be, this goal is beyond his reach.

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In particular, Xi cannot bring himself to incentivise the rich to remain and help revive the economy. Chinese billionaires are leaving China because Xi Jinping’s policies make it intolerable for them. His visceral mistrust, persecution and disruption of successful entrepreneurs; failure to address key causes of economic stagnation and decline, most notably the distorted property market; increasingly fraught relations with major foreign trading partners and worries about future tariffs and sanctions linked to the Ukraine/Taiwan nexus – all add up to a powerful incentive to get out fast.

If China’s brightest entrepreneurs do not feel safe in Xi’s revisionist Party state, why do so many in the West cling to the belief that China is serious about restoring mutually beneficial foreign trade relations? In fact, Xi  has no wish to revive a steady state in any aspect of relations with the West. He now seeks only to engage with foreign financial and commercial partnerships that serve to advance his military and political agenda, which is directly opposed to Western interests. Crucially, China’s massive trade surpluses are now used chiefly to intensify conflict and competition.

Putin’s escalating conflict in Ukraine depends largely on Chinese support. Instead of prioritising domestic prosperity, Xi spends far more on digital surveillance at home and expansion of military influence abroad, including the fastest proliferation of nuclear weapons since the Cold War. Beijing’s patronage has allowed Kim Jong Un publicly to rejoin the nuclear arms race. Iran is another member of the cabal. Their common cause is to overtake the US.

This process has not yet reached the point at which China can comfortably sustain major reduction of its Western market access. The prospect of strengthened US-led sanctions under either new administration is a matter of urgent concern.  Lately this concern has built around Western tariffs against Chinese electric vehicles.

Not only are Chinese EVs as unfairly priced as Huawei’s digital equipment; they too pose a serious security risk. Their integral Cellular Internet of things Modules (CIMs) can transmit audio and video data from in and around the vehicle, or sabotage it if so instructed. No rational economic relationship, fully cognisant of today’s geostrategic risks, can afford to ignore such harmful Trojan horses.

History shows that appeasement merely strengthens ruthless totalitarian opponents. Democracies which import Chinese EVs are simply paying an implacable “systemic competitor” to compromise their national security, while undermining the efforts of wiser allies and partners.

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