Letter from Asia published in L’Opinion, 17th January 2023.
The big question in 2023 is not the economic upturn but President Xi’s attitude to the U-turn that has been forced upon him.
Even in China, the economy will have its way and ends up getting the better of ideology. President Xi has just found that out, for the benighted finances of local authorities have forced him into an ad hoc “reopening” of the country in face of the Omicron virus. Nevertheless, forever on the lookout for ways to turn a threat into an opportunity, Beijing seems about to win its gamble, in complete contradiction to our Western principles of precaution. First of all, in reaching collective immunity in a few weeks, rather than in several months in the West, and benefit from the benign nature of the current variant.
Secondly, in limiting the death rate to 1 in every 1,000 — as the director of the Chinese Center for Disease Control and Prevention announced recently to international investors — i.e. “only” 1 to 1.5 million deaths, mostly among the elderly and in rural areas. And, finally, vigorously reviving the economy as from February, just after the Chinese New Year.
Revising the forecasts. This is enough to make macro-economists revise upwards their growth forecasts for 2023 to about 6%, driven by “revenge consumption” by Chinese young people. A survey carried out in December by the Oliver Wyman firm shows the incredible energy of Chinese consumers, two-thirds of whom, in the space of only one week, went from the fear of going outside their homes to the desire to do so once again! This is a change of attitude that favors a strong recovery for consumption in 2023, given that, in 2022, Chinese households were obliged to put aside almost $2,000 billion in savings.
Forever on the lookout for ways to turn a threat into an opportunity, Beijing seems about to win its gamble, in complete contradiction to our Western principles of precaution.
The big question in 2023 is not the economic upturn but President Xi’s attitude to the U-turn that has been forced upon him and which has affected his personal credibility with the population. Will he come to recognize the excessive nature of the regulatory measures imposed since the summer of 2021 — which led to a complete standstill of the economy — and the need to find a new balance by making selective concessions? Or, like Mao after the Great Leap Forward, will he take advantage of the economic recovery to make another purge of his opponents, accused of being to blame for the hastily improvised end to “Zero Covid”?
An initial answer has just been provided by the recent announcement that state entities would be allotted golden shares in subsidiaries of the Alibaba and Tencent groups, following on Bytedance, Bilibili and Weibo. These preferential shares give de facto control to the Chinese regulator over the strategy and content of these main players on the Chinese internet. The message is clear: China’s future growth will go apace with increased state control, which, in the long run, will prioritize internal security in all sectors — i.e. the continuance of the Communist Party — over any other consideration.
We should therefore savor the fact that the economic prospects look better than expected in this new year of the rabbit.