China: after the “zero Covid” policy, next, the “zero growth” policy?

David Baverez
3 min readFeb 9, 2024
©Bruno Klein

This column was previously published in l’Opinion on 1st december 2023.

The stagnation of China’s GDP in USD terms over the last two years is a major trend reversal. It is high time for Beijing to make a choice, whether to make a U-turn with regards to the control that has been imposed on the private sector since the 20th Party Congress.

Officially, China’s GDP should grow by 5% this year, having progressed by 3% in 2022. However, in dollar terms, if one takes account of the RMB devaluation over the last two years, GDP is merely stable. This represents a rupture with the preceding decade, during which China made considerable economic progress and saw its currency appreciate.

2022 marks the end of a 40-year cycle since 1980. This relative stagnation can mainly be explained by the lack of recovery in private investment, which has remained frozen year to date. Yet, traditionally, the private sector accounts for 50% of taxes, 60% of GDP, 70% of investment, 80% of job creation, and 90% of companies of the country.

What form will this new Public-Private Partnership take in a digital world with its oligopolies and monopolies, which will sooner or later be incompatible with any control by the Chinese Communist Party?

Two important events illustrate this major trend reversal. Firstly, the announcement in the third quarter, and for the first time since 1998 — the earliest date for which statistics are available –, that Foreign Direct Investment in China was net negative. In anticipation of the friendly handshake between Presidents Xi Jinping and Joe Biden at the APAC Summit, American multinationals hastened to get their dividends out of China, which were greater than their new investment. If this trend were to be confirmed in the coming quarters, it would show that the American “de-risking” strategy vis a vis China is speeding up.

Adobe Firefly / L’Opinion

The second strong signal was sent by the Alibaba group, which stopped the flotation of its cloud operations on the stock exchange. This is opposite to what happened to its subsidiary Ant Financial Services, whose flotation in 2020 was also stopped; at the time, it was the regulator who intervened in extremis to disallow the flotation, whereas, in the current situation, it is the company itself that has made the decision to do so. A clear message is being sent to the government: its confrontational policy regarding the USA, leading to the ban on high tech imports, will considerably hinder any technological upswing in China beyond the next twelve months. The most used explanation for this withdrawal concerns the difficulty in getting future supplies of US high-performance chips, which are indispensable for developing generative artificial intelligence. The American company Open AI has invested the trifling sum of $10 billion over the last twelve months in order to develop its algorithms, which shows the inroads the US is making into generative AI. Before Covid, China was still thought to be well in advance when it came to AI.

The time has come for Beijing to make choices. Xi Jinping’s government is going to have to decide if, as with the “zero Covid” policy a year ago, it will make a U-turn regarding the control that has been imposed on the private sector since the 20th Party Congress. What form will this new Public-Private Partnership take in a digital world with its oligopolies and monopolies, which will sooner or later be incompatible with any control by the Chinese Communist Party? The answer to this difficult equation can only be a co-working space “with Chinese characteristics”; the only way for Beijing to emerge from its new form of lockdown: the “zero value growth”.

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David Baverez

Business angel / demon. Based in Hong Kong since 2011. Columnist, author, speaker.