Welcome to the 200th edition of Trade War and Happy Year of the Dragon!
龍年快樂!恭喜发财!
Trade War was first published in December 2019. A lot has happened in the four-plus years since then. And Trade War has covered a lot of China news.
For those of you who haven’t yet become a paid subscriber, please consider doing so, and get full access to all the China news in Trade War going forward. (And a reminder that only paid subscribers get access to the archives—and with 200 issues and counting the archives are full of a lot of easily searchable economic and political news about China.)
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I look forward to seeing all of you for the next one hundred issues and beyond.
On to the news ~
‘Hide and bide’ is not just about foreign policy. China’s leaders have also adopted a ‘hide and bide’ approach to developing their economy. Will they cast it off, as they already have with foreign policy, and be open about how they intend to outcompete the West?
Call it a demand deficit deflation dilemma. A lack of confidence about the future means nervous consumers are keeping their wallets closed, fanning a demand deficit, and spurring more deflation. Meanwhile Beijing so far has avoided major stimulus.
-Falling pork sales bode ill for early end to deflation. And the saga of Evergrande brings back memories of the 1998 demise of a debt-strapped financial giant.
-Beijing puts a new regulator in place as markets swoon. And international investment banks prepare to cut more jobs in China and Hong Kong.
-China hawk Mike Gallagher to quit Congress. And as US relies more on industrial policy—becoming more like China—tensions between the two countries will grow.
Argentina’s Lionel Messi does a no-show in Hong Kong and outrages China
As BYD surpasses Tesla, the electric car company’s founder Wang Chuanfu still is barely known in the West
The ‘got-rich-first’ generation in China are feeling left out as they watch their property and financial investments collapse
‘Hide and bide’ cast off for economy too?
China’s leaders have long adopted a ‘hide and bide’ approach to developing their economy. Will they cast it off, as they already have with foreign policy, and be more open about how they intend to outcompete the West?
That’s a question I posed to China-based company executives during a recent video event entitled “Economic Prognostications For the Year of the Dragon,” also featuring Qian (Louise) Liu, Managing Director of the Economist Group in Greater China.
Here’s how China public relations veteran Scott Kronick summed up my comments in a blog he wrote:
“Dexter Roberts took a different perspective in his remarks, highlighting the ever-increasing competition between the U.S. and China. He noted:
China, under Xi Jinping, is very much pushing towards a much more politically-driven economy and business sector, even though we have seen a different face of China more recently.
China, under Xi Jinping, has eschewed its previous “hide and bide” approach to global affairs. That’s hardly surprising for a rising superpower like China, that some have predicted will surpass the US and become the world’s largest economy, if not at least remain strongly in second place, in terms of economic strength.
We are seeing more and more dual messaging, externally and internally, often separated that way to reach global audiences and internal audiences in China. And, this is coming from both Xi Jinping and Premier Li Qiang.
Externally we are hearing about market openness, and also about global opportunity.
In internal speeches we are hearing a lot, particularly from Xi Jinping, about the necessity of self-reliance, and also national security.
According to Xi, China’s national security needs to be front and center, including in making business and economic decisions.
Win-win rhetoric is disappearing, as the conversations move toward competitive language. As China grows, Xi sees the world as having winners and losers. We have heard frequently from Xi Jinping that the ‘East is rising and the West is declining,’ and ‘time and momentum are on our side.’
This rhetoric is mirrored in the west, as many in Washington D.C. take combative stances against China.
Demand deficit deflation dilemma
Call it a demand deficit deflation dilemma. A lack of confidence about the future means nervous consumers are keeping their wallets closed, fanning a demand deficit, and spurring more deflation.
At the same time, policymakers seem intent on avoiding the major stimulus measures they have used during economic downturns in years past.
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