You can learn a lot about a country in eying its flag. As in Russia, where it is the emblem of the revolution, Chinese flag is red. But in this country, from always, it is mainly the emblem of wealth. Young women frequently chose that color for their wedding dress. On this background, there are five stars, four as a half-circle and the fifth, larger, atop of them. They are yellow, the emperor color. Unlike the American and European flags, where they mean the belonging to a Federation or to a Union, what is important is their number. In China four is associated to the four cardinal points or to the four walls of a house. It means “everything”, “every direction”. The fifth star adds a dimension: stability. It is the roof which covers the house above its four walls.
President Xi Jinping action could be summarized in taking the symbols which are present on his country flag: a stable and wealthy China with a global ambition. The inscription of his thought in the Communist Party statutes, after its 19th congress has been interpreted outside of the country as a resurgence of personal power. The same honor had been granted to Mao and to Deng Xiaoping as the recognition of their past action. Xi Jinping is only at the start of his second term. Until now, a non written rule wanted that it was not possible to achieve more than two. But none among the other six members of the Party executive board seems to appear as a possible successor. It is a major strategic choice. If the Chinese president wants to keep his full authority, he must control the agenda. Maybe he will not stay in power more than ten years but it is possible and that eventuality will strengthen his position in the coming years.
China stability is not reduced to keeping in power its leaders. It depends of the acceptation of their political choices. The considerable improvement of the life conditions of the Chinese people for thirty years cannot be a factor of crisis, despite the deep inequalities it generated because these ones are mainly between generations. It is difficult to imagine that the grandparents who have suffered from the Mao economic mistakes would rebel against their children who have been the main benefactors of the reforms instituted by Deng Xiaoping, which would put in danger their grandchildren future. On the opposite, the exhibition of huge fortunes, not always the result of talent is able to break the link between the people and its political leaders. The repression campaign against corruption was not without political thoughts because it targeted several potential rivals of the current head of state. But to reduce it to this interpretation would be a mistake. In doing that, Beijing condemned practices which were putting at risk, on the long term, the credibility of the country political system. The other risk is related to environment. The Chinese people accepts a model where everybody improves his situation even if some improve at a much faster rhythm than the others. But he will refuse that his daily safety is downgraded and his health put in danger. The determination of the leaders to fight both the climate warming and pollutions at local level must not be underestimated. It is, on the same level than the moralization of the political life, an essential factor of the country long term stability.
A stable China, but also a rich China. Growth is going on at a very high rate, if we take into account the level of development already reached. And the 2017 objectives will be easily met with a near 7% rate. Transformation through higher value-added productions is progressing with an innovation capacity which many countries in Europe would dream about. Internal demand is moving toward household consumption, notably in favor of tourism which enjoys a strong expansion. They still keep a very high saving rate which contributes to the enrichment of the country. So, production tools have to adapt themselves. The heavy industry is in overcapacity, too much indebted and is hold in State and local authorities outstretched arms. But the risk, regarding the Chinese economy these “zombies companies” as they are nicknamed in Europe, could generate is overestimated. The banking system and the China central Bank with its currencies reserves over 3000 billion dollars have the resources to cope with the situation. Restructuring will be painful and will take time but the process has started. The role of the market, in the resources allocation process is not only recognized. It is acquiring a decisive place and the government can even, when it is necessary, use supply-side policies as Xi Jinping has announced in his speech during the party Congress.
The bumps which have impacted financial markets in Asia must not be dramatized. The globalization process of the Chinese currency initiated seven years ago has gone through a decisive step with its inclusion by the IMF in the currencies basket used to calculate Special Drawing Rights. Chinese companies are learning to take all the benefits, sometimes with some excesses the central bank has to correct. Since the 2015 summer short crisis, the Chinese currency is one of the most stable in the world. To replicate to the downgrading of its signature by two notation agencies, Beijing has decided to issue, some days ago, dollar denominated bonds. The demonstration has been dazzling: the issuance, carrying an interest rate near U.S. Treasury bonds one has been oversubscribed eleven times. If China is worrying, it is for other reasons and it is the third part of Xi Jinping mandate: to be a global economic power.
Until now, the globalization of the economy occurred from outside, China becoming the factory of the world in supplying for instance Walmart and Nike. That trend has reached its limits with the elevation of Chinese workers level of life. The current transformation of the country is taking into account the consequences. From passive, globalization will become conquering with Chinese companies investment all around the world as American, European and Japanese did in the past. It will not occur without some excesses. Four firms, Dalian Wanda, Anbang, HNA and Fosum, the ClubMed shareholder, have been called to order by Beijing. After the strong growth in 2015 and 2016, the 2017 year shows a retreat but the trend is irreversible even if it will take time to everyone to overcome the new freedoms acquired in that field. It constitutes a growth support for the economy and a noticeable diversification for the companies which have accumulated financial resources.
To favor the development of neighboring countries contributes also to it. It is the meaning of the policy launched in 2013 by Xi Jinping known as “Belt and Road Initiative” and which we translated in Europe through its historical reference as the ancient Silk Roads. It consists in accelerating the development in Central and Southern Asia of the countries through investments in infrastructures financed by a new international bank to which most of the developed countries have contributed. The participation of the Chinese president to the Davos Forum this year, the conference he hosted in May with participants of the Belt and Road Initiative project, APEC and ASEAN Summits which have just been held are reflecting the growing power of the Chinese economic diplomacy at a time when Europe is weakened by the Brexit and the German political crisis and the U.S. by the behavior of their president.
A stable, rich and present all around the world China, as it is reflected in its flag is what the French government and the companies will be confronted with during the coming years. It is the duty to them to understand that new situation to take advantage of the opportunities which will be generated by this major mutation of the global economy.