Case Study: Strategic Repositioning at Davos 2026
Background
At the 2026 World Economic Forum in Davos, China adopted a markedly different approach compared to the United States. While President Trump hosted dozens of global business leaders at high-profile receptions, China maintained a deliberately low-key presence through Vice-Premier He Lifeng, focusing on intimate business engagements rather than grand diplomatic gestures.
Strategic Approach
China’s strategy appears rooted in the ancient principle from The Art of War: “controlling the dynamic through stillness.” This approach involves:
Diplomatic Restraint: He Lifeng delivered a brief, focused speech emphasizing China’s willingness to purchase more foreign goods and services, signaling a shift from pursuing trade surpluses to becoming a more balanced trading partner.
Intimate Business Engagement: Rather than large-scale events, China conducted private lunches with Western executives, delivering a simple message: “We are open for business.”
Timing Advantage: China positioned itself as a stable alternative at a moment when US-Europe relations face strain over issues like Greenland, allowing Beijing to present itself as “reliable and predictable” without aggressive promotion.
Learning from Past Mistakes
The case study reveals China’s adaptation following missteps from three years prior, when aggressive crackdowns on real estate, technology firms, and education sectors severely damaged investor confidence. The current approach prioritizes:
- Regulatory predictability and stability
- Measured communication rather than sudden policy shifts
- Rebuilding trust through consistent messaging
- Addressing concerns about market access and business environment
Key Challenges
Despite the refined strategy, fundamental obstacles remain:
Overcapacity Issues: China continues to export excess manufacturing capacity, particularly in electric vehicles and related sectors, creating friction with trading partners who view this as market distortion.
Economic Headwinds: With growth hitting a three-year low, China’s ability to deliver on consumption-led economic rebalancing remains uncertain.
Trust Deficit: Years of regulatory volatility have created skepticism that requires sustained effort to overcome, beyond messaging changes.
Implementation Gap: Beijing’s rhetoric about boosting domestic consumption has yet to translate into concrete policy results that foreign businesses can rely upon.
Outlook: Opportunities and Risks
Positive Indicators
Diplomatic Momentum: Multiple high-level engagements suggest growing receptiveness to China as an economic partner:
- Britain working to revive “Golden Era” business dialogue during PM Starmer’s upcoming China visit
- Finland’s PM planning business delegation spanning resources, manufacturing, and food sectors
- Canada’s PM Mark Carney publicly endorsing China as a “reliable and predictable partner”
Geopolitical Window: US-Europe tensions over Greenland and broader policy unpredictability create space for China to position itself as a stabilizing force in global trade and investment.
EU Diversification Imperative: As the 27-member bloc seeks to reduce US reliance, China represents one of few alternatives with sufficient scale and capital to matter strategically.
Risk Factors
Structural Economic Concerns: China’s transition from investment-led to consumption-driven growth remains incomplete, with domestic consumption failing to offset declining property and infrastructure investment.
Overcapacity Persistence: Without addressing excess production capacity, particularly in strategic industries like EVs and green technology, trade tensions with Europe will likely intensify regardless of diplomatic messaging.
Trust Volatility: China’s credibility depends on sustained policy consistency. Any return to heavy-handed regulatory interventions or sudden policy reversals would undo current goodwill-building efforts.
Geopolitical Competition: US-China strategic rivalry extends beyond trade to technology, security, and regional influence. European nations face pressure to align with US positions on issues like technology restrictions and supply chain security.
Medium-Term Projections (2026-2028)
Trade Relations: Expect selective deepening in sectors where European and Chinese interests align (green technology, luxury goods, certain manufacturing), while strategic industries face continued restrictions.
Investment Flows: Two-way investment likely to increase modestly, particularly in non-strategic sectors, but well below pre-pandemic levels due to persistent risk concerns.
Diplomatic Engagement: High-level visits and dialogue mechanisms will expand, but substantive policy convergence remains limited by fundamental value differences and security concerns.
Economic Rebalancing: China’s consumption-led growth transition will progress slowly, meaning overcapacity issues persist as a source of trade friction through at least 2027-2028.
Singapore Impact Analysis
Strategic Positioning
Singapore faces complex implications from China’s repositioning and evolving US-China-Europe dynamics:
Hub Status Enhancement: As China seeks closer European engagement and Europe explores US alternatives, Singapore’s position as a neutral financial and business hub gains value. The city-state can facilitate capital flows, business deals, and diplomatic engagement that might face obstacles through direct channels.
Financial Services Opportunity: With China emphasizing openness to foreign services and European firms seeking Asian exposure, Singapore’s financial sector stands to benefit from increased intermediation, wealth management, and cross-border transaction volumes.
Supply Chain Role: Singapore’s manufacturing and logistics sectors could see opportunities as companies pursue “China+1” strategies that still maintain China exposure while diversifying risk, positioning Singapore as a regional coordination center.
Economic Considerations
Trade Flows: Singapore’s entrepôt trade could benefit from increased China-Europe commercial activity, though overcapacity in Chinese manufacturing may pressure Singapore’s own industrial competitiveness in certain sectors.
Investment Attraction: Singapore competes with China for European and global investment. A more “open for business” China creates competitive pressure, but Singapore’s rule of law, IP protection, and regulatory transparency provide differentiation.
Technology Sector: Singapore’s semiconductor and technology manufacturing faces both opportunities (increased demand from global supply chain diversification) and risks (Chinese overcapacity in adjacent sectors, potential pressure to choose sides on technology restrictions).
Policy Implications
Diplomatic Balancing: Singapore must maintain its careful balance between US security partnerships and strong economic ties with China. A closer China-Europe relationship could provide Singapore with more diplomatic space, but also creates pressure to facilitate rather than obstruct emerging partnerships.
Regional Leadership: ASEAN cohesion becomes more important as major powers compete for influence. Singapore’s leadership in maintaining ASEAN centrality and neutrality will be tested as China seeks regional partners to offset US influence.
Economic Diversification: The shifting landscape reinforces Singapore’s need to avoid over-dependence on any single economic partner, continuing to deepen ties with India, ASEAN neighbors, and emerging markets while managing US and China relationships.
Sector-Specific Impacts
Financial Services: Increased China-Europe capital flows benefit Singapore’s banks, asset managers, and wealth management firms serving cross-border clients.
Manufacturing: Pressure from Chinese overcapacity in EVs and electronics, but opportunities in specialized components and high-value manufacturing.
Logistics & Trade: Modest positive impact from increased trade volumes, though direct China-Europe shipping routes may bypass Singapore for some cargo.
Professional Services: Legal, consulting, and accounting firms serving cross-border M&A and business establishment could see increased activity.
Technology: Complex picture with opportunities in semiconductors and software services, but competitive pressure in hardware and potential caught in middle of technology restrictions.
Strategic Recommendations for Singapore
- Enhance Neutral Hub Status: Invest in infrastructure and regulatory frameworks that position Singapore as the preferred location for China-Europe business facilitation.
- Deepen Financial Integration: Expand currency clearing, wealth management, and capital markets services connecting Chinese and European markets.
- Selective Industrial Focus: Concentrate on high-value manufacturing niches where Singapore has clear advantages rather than competing with Chinese scale.
- ASEAN Coordination: Lead regional efforts to ensure ASEAN benefits collectively from major power competition rather than being divided.
- Regulatory Excellence: Maintain and enhance Singapore’s reputation for predictable, transparent governance as a key differentiator from China’s regulatory volatility.
- Technology Positioning: Develop clear frameworks for technology cooperation that allow Singapore to participate in multiple ecosystems while managing security concerns.