“Letter from Asia” published in L’Opinion, 14th February 2023.
The world has to get used to a less than 5% growth rate for the Chinese economy, which is based on development in the tech sector but limited by increasing government control.
The main thing that we learned from the People’s National Congress that has just taken place in Beijing was not the forecast of relatively little growth in 2023, expected to be only 5%. Rather, it was what President Xi said about the CATL group, when he expressed both “delight and concern”. This was most instructive. CATL is the leader in the field of electric batteries, controls almost half the world market, generates over $5 billion dollars in annual profits, and has a stock market value of $150 billion. It is one of the greatest Chinese industrial successes of the last decade.
Faced by the success of a leading Chinese company that now leads the world in an industry of the future, Xi Jinping undoubtedly wanted to express his “delight”, but he also expressed “concern” over what is regarded as too swift a rise. The government now has a fixed rule: “companies working in industries of the future must manage to balance growth and security; the development of these industries must be well planned and undergo complete risk analysis.”
Western investors note that the private sector in China is responsible for creating 100% of new jobs, but the government sees this as 100% of its economic problems. For Beijing, free competition leads to bubbles imploding because of excess capacity, as shown by today’s real estate crisis.
Hence President Xi’s “concern”, and which explains why we must now get used to future growth at less than 5%, limited by the government’s growing obsession with control. This obsession is embodied in the creation of a new super-regulatory body for the financial sector and a National Data Bureau which, among other things, is in charge of supervising algorithms — a highly sensitive area at a time when Chinese ChatGPTs are being developed.
Control will produce major successes in artificial intelligence, by its very nature a “Communist” technology according to the investor Peter Thiel, for it attempts to attach normative thought to the lowest common denominator.
Paradoxes. Beijing loves paradoxes. It intends to build an economy based on the premise that, by adopting technology as swiftly as possible, this will give it its main edge over the competition. But, at the same time, it intends to keep the most disruptive minds away from the Chinese People’s Political Consultative Conference, i.e. people such as the Presidents of Tencent, Baidu and Netease. Linked to the quest for national “technological self-sufficiency” — the opposite of the cultural melting pot of Silicon Valley — this rejection of risk culture in favor of control will have serious implications.
On the one hand, it will produce major successes in artificial intelligence, by its very nature a “Communist” technology according to the investor Peter Thiel, for it attempts to attach normative thought to the lowest common denominator. On the other hand, we will see some resounding failures in disruptive sectors like that of B2B software and semi-conductors, where the West still leads.
This does not necessarily make China “non-investable”, as George Soros asserted, but, for investors, it returns China to the status of an emerging nation in which the growth rate no longer compensates for the political risk, given that it is expected to be low. As is often the case in China, it is only the exceptions to the rule that will bring the investor some joy. But anxieties will always be there, even in the case of the biggest industrial successes.