The Chinese calendar, through a twelve years cycle, gives to the current year the name of an animal. 2024 so will be the year of the Dragon. In 2022, it was the Tiger. In France, this nickname had been given to a statesman, Georges Clemenceau. The year of the Tiger was definitely not the “Clemenceau year” because was attributed to his proximity with Japan the transfer to this country of the German concessions in China during the 1919 negotiations which will lead to the Versailles Treaty. That major humiliation will not be without connection with the political and social moves which will lead to the civil war, the Long March and the arrival of communism. The great rival to Mao, Chiang Kai-shek, will then fly to Formosa which will become Taiwan.
China, in 2024, is going to be confronted with several major challenges and the first between them will precisely be the evolution of its relationship with Taiwan. The international community, and notably the United States after the agreement negotiated by Henry Kissinger with its counterpart at that time, Chou En Lai, considers that there is only one China. The country leaders have now fixed as an objective, until the one hundred years anniversary of the Popular Republic in 2049, to reintegrate the island in the country, as that has been the case with Hong Kong. But that will come up against the hostility of the Western countries. It has provoked tough tensions with the U.S. and is far from getting the unanimity inside the island itself.
Presidential elections will occur during January in Taiwan. Two parties dominate the political life, the Democrats, currently being in power which say they are determined to lead to independence but without fixing a precise agenda and the Kuomintang which is in favor if not of the integration inside China but at least of a progressive rapprochement, which could appear like a paradox regarding the past. It is a member of this party who has by large won the election at the Taïpeh townhall and the result of the presidential election is highly uncertain. The first among the big challenges of Beijing in 2024 will then be to manage its relationships with Taiwan in function of the result of this election under the eye of the international community. The island enterprises have strategic positions in the new technologies, which has not escaped of the attention of the U.S. which see China as a major economic rival. The future of these enterprise can so be affected in the case of tensions and that could have repercussions on many other countries.
The second challenge for the Chinese leaders is about politics. The exceptional growth period the country has known from the Eighties with the reforms initiated by Deng Xiaoping has given the birth to giants in technologies, listed on the stock markets which has allowed to their founders to becoming billionaires. The South of the country, from Shanghai to Guangzhou, and of course going through Shenzhen, has become a new California, and from that, has generated this extraordinary paradox: the communist regime, known for being as the most rigorous in the world is at the head of an economy whose private enterprises have nothing to envy to these of the most liberal capitalist regimes.
That has leaded Beijing leaders to take severe measures, sometimes against some executives of these companies, in order to correcting a situation they consider as being excessive. That had an immediate consequence on the financial markets through the creation of a feeling of defiance which has dissuaded the international operators to invest in the country or, when Chinese enterprises wanted to raise funds outside the country to subscript to these operations. In an environment already affected by the tensions regarding Taiwan and by the protectionism increase, that change has contributed to the slowing of the China growth. The challenge to which Beijing is now confronted with is so to recover a good balance between the requirements of the economic development of the country and the ideological conceptions carried by their political leaders.
That is all the more important than these last decades have been characterized by an unprecedent globalization whose China has been in the same time one of the main engines and its main beneficiary. But the sanitary crisis and the invasion of Ukraine by Russia have put into question this global model based on a universal peace which doesn’t exist anymore and on growing flows of goods in the world whose safety cannot anymore be guaranteed. 2024 must so be for China the year of the taking into consideration of that transformation of the world and of the adoption of the measures which will allow the Chinese enterprises to beginning their extensive change to adapt themselves to the constraints of that new environment.
The model “China, the factory of the world” for all these reasons will so have to be progressively abandoned. The Chinese companies couldn’t anymore have as a vocation to be the sub-contractors or only the suppliers of the major groups located in the U.S. or in Europe. They will have to learn how to conceive, to produce and after to sale on the foreign markets the goods which correspond to the demand of clients living everywhere in the world with their own brands. The trend has started in the car industry and the major Chinese carmakers, thanks to their leading position in the electric vehicles do not hesitate anymore to produce and to offer their models on the European market and are even considering about going to the American market, despite the protectionist barriers which are now being erected. But that will need important investments and efforts to identify what meet the expectations of hundred of millions new consumers who have not necessary the same tastes that their Chinese homologues.
These necessary transformations will have to be accomplished in a more tense political context and in a conjuncture less favorable than in the past. Acceleration signals about the rebound during the end of the year have occurred with a recovery of the retail sales in November (+10%), of the industry value-added (+6%) and a faster growth each month of the electricity consumption (+6.3% in November against +5% as an average during the first half of the year). But enterprises investments grow less (+3%), foreign direct investments plunge (-10%) as the activity in the real estate sector (-9.4%). The government which has at its disposal enough financial resources will have to launch in 2024 a policy which sustains activity to create inside the country a favorable climate to soften the consequences of a downgraded international environment.
The central bank, in making again easier its financial conditions has made a first step. It remains to the State to launch investments programs, notably in the energy transition, important enough to offset the effects of the real estate crisis. Its fiscal receipts will rise by 9% in 2023, which allows to deciding measures in favor of household consumption and of a natality recovery. China is confronted with the ageing of its population, which could someday lead to a penury of the workforce. The 2024 year could offer the opportunity to start a real child benefit policy. Its effects will come on the long term but that would also have immediate consequences on the household consumption.
The year of the Dragon will not be for China an easy year both regarding international issues with the evolution of the situation in Taiwan and about the many challenges to cope with in the country. The Glorious Forties have come to their end. The accomplished progresses have been spectacular. But time has come to build a new growth model.