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AB 2000 studies

Alain Boublil Blog


The China new challenges

The place China has taken in the world economy has become so important that its difficulties have repercussions at the planet scale. That economic success took a long time to come. The President Mao has given back to the country its unit and its sovereignty after more than a century of Western and Japanese aggressions and people will be grateful to him forever for that. But his economic results, with the Great Leap Forward and the Cultural Revolution were disastrous. That did not impeach Alain Peyrefitte in 1973 in the conclusion of his book” When China wakes up” to praise his “sparkling success” and to affirm that “the country engaged itself in the most radical revolutionary adventure that any human society had ever known.” Valery Giscard d’Estaing, after the Chinese president death, gave him a tribute in declaring that “a lighthouse of the world thought” passed away.

The reforms introduced by Deng Xiao Ping from 1979 have then allowed China in thirty years to becoming the second world economy. He based his policy on the success of the Chinese diaspora in the Asia business community through the opening of special economic zones where they built their factories. They gave to their former compatriots the appetite for success and they were followed by the major Western and Japanese groups which invested in the country to look for the quality and the low costs of the workforce. The top point of that mutation was the China admission in 2001 in the World Trade Organization. Deng Xiao Ping has been one of the Fathers of the globalization.

Hundreds of million people went out from poverty. It was followed by a fast urbanization, huge investments in infrastructures, the instauration of the consumer society, the creation of financial markets and huge fortunes at the image of what was happening in the United States. A major turnaround occurred when the president Xi Jinping announced that the Chinese prosperity had to be shared and when the government took restrictive measures and sometimes started pursuits against these it considered they were at the origin of these excesses. It was at that time that the pandemic started. The political hardening, already on the way, found there a new field of intervention and the measures which were adopted to fight against the pandemic were the most restrictive in the world. Is China going, in order to cope with challenges it is confronted with, to come back to its Maoist origins logic or is it going to recover the way initiated by Deng Xiao Ping?

The country economic achievements are reinsuring. Growth has not regained the level it had before the pandemic but to the difference of the other developed countries, China has not known a fall of its production in 2020. The 5% yearly average target during the 2021-2025 period will be very difficult to attain but the 3% forecast growth in 2022 and 2023 has to be compared to the recession which threats the other economies. Inflation, under 2%, is mastered due to a larger energetic independence and the unemployment rate in urban territories around 5% is considered as satisfying. The real estate sector is going through a serious financial crisis but the State has the tools to avoid a bankruptcies wave which would have heavy consequences on the whole economy.” Whatever it costs” is not limited to Western countries.

The demographic ageing generated by the consequence of the past one-child policy must not create a workforce shortage in the future because the share of the agricultural population is still very high (23% against less than 5% in the developed countries) and it constitutes a reserve allowing to avoiding tensions on the job market.

The household consumption has been heavily impacted by the lockdown measures but their lifting would allow to recovering a normal situation. Foreign trade still shows a huge surplus (800 billion dollars since the beginning of the year) but we see a reorientation of the flows in favor of South-East Asia (+15%) to the detriment of the U.S. (+4.8%) and of the European Union (+7%) which well reflects the geopolitical and sanitary tensions appeared for two years.

The government has just abandoned its very unpopular Zero-covid and lockdowns policy which restrained travels and had provoked demonstrations in most of the large Chinese cities. But we would be wrong to think that it is the worry about a general uprising, in fact little likely, which has incited this 180° turnaround. It is to the opposite, the demonstrations of the workers of the largest smart-phone plant in the world, located in Zhengzhou, due to the lockdowns consequences on employment, working conditions and remunerations which have made the authorities to become conscious of the economic consequences of this ultra-restrictive policy. Foxconn turnover had fallen by 19% in November after the discovery of few contamination cases.

Supply chains disruptions of the major Chinese and foreign industrial groups would so be attenuated but not the tensions between Beijing and Washington. American authorities have launched a large collection of protectionist measures in order to not being any more dependent from China in the high-tech sectors and especially in chips. The Taiwanese giant TSMC controls more than 70% of the world market. It has just profited from an American incentive to build a factory in Arizona but its main production centers are in China. The strengthening of the presence of the Chinese army in the China Sea and in the Taiwan Streat have been interpreted by the White House as a forward signal of an invasion and the parallel has been done with Moscow and the war in Ukraine.

But Beijing seems to have chosen the strengthening of the economic partnership with the island which has shown until now it was profitable for both parts. It is incited by the evolution of the Taiwanese public opinion which has leaded to the strong progress of the Kuomintang, traditionally close to Chinese Communist Party, which appears as the winner of the last municipal elections and which has won Taipeh City Hall. The presidential elections in 2024 could so see its come back into power. Being supported by the business community which are very involved in the Chinese economy, the new Taiwanese political leaders will quickly lift any worry about relations with Beijing.

The prolongation of President Xi Jinping mandate and the content of the speeches delivered during the Communist Party Congress in October have given to the world the look of an authoritarian State, an image reinforced by the toughness of the measures adopted to fight against the pandemic and largely spread by the United States which see China as a strategic rival. It was then thought that the “China of Mao” had come back and that was at the worst time because that was coinciding with the return of the war in Europe.

But the occurred turnaround, regarding the fight against the pandemic and the messages delivered during the major international meetings to which the China president came back to participate as during his visit in the Middle-East and especially in Saudi Arabia where have been opened new cooperation fields, must not be underestimated. The “Deng Xiao Ping” China is still there. The China choice, in order to cope with the new challenges the country is facing, despite the authoritarian image it gives, is not the lockdown inside its borders and the isolation toward foreign countries but its progressive adaptation to the new state of the world.


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