China disappoints economists and foreign investors

More than three months have passed since the Chinese National Assembly ratified the appointment of Li Qiang as prime minister, enough time for the new number two of the regime to assume his powers and face this stage with new initiatives. Success, however, has not accompanied his international baptism. Neither his visits to Germany and France, nor his speech at the opening of the Davos Summer Forum, which is held in the Chinese city of Tianjin, have had the expected response. This has been influenced by the lack of concrete proposals to consolidate the country’s economic recovery in the face of strategies from the United States and Europe that play against and mark distances respectively. A situation that has led political scientist and China expert Jean-Pierre Cabestan to define the new relationship between the Asian giant and the West as “more complicated, controversial and competitive than before”.

Cabestan draws these conclusions from Li’s visits to Germany and France, considering that the ultimate mission of this trip was none other than cultivating Europe to weaken any US-led anti-China united front. The French political scientist was skeptical about the results of the strategy. “On the economic front, it may work to some extent, but on the security side, I doubt it,” the Hong Kong Baptist University professor told South China Morning Post.

The reality is that Li’s visit coincided in time with that of the US Secretary of State, Antony Blinken, to China, and the implementation in Brussels of a plan to tighten export controls and select investments in sensitive technologies towards the asian country. A panorama that made it easier for him, in his interventions both in Berlin and Paris, Li to insist on combating the idea that “the greatest risk, in reality, is not cooperating, and the lack of development, the greatest insecurity”, committing himself to continue with the opening of the Chinese market. A classic that everyday reality later relegates to oblivion in a drawer.

Today, neither the German nor the French community, nor that of the European Union in general have regained confidence in the Chinese market after the Asian giant blocked foreign business for three years under the draconian control measures of Covid-19. . A reality, on the other hand, that places both the German Chancellor, Olaf Scholz, and the French President, Emmanuel Macron, in an embarrassing position. Of them, Li hopes they will help him design a European strategy of derisking with greater emphasis on free and fair trade, betting on cooperation and limiting the plan to tighten export controls and investment selection in sensitive technologies. However, it should not wait much longer, trusting, for example, that they maintain a “strategic autonomy” far removed from the decoupling that Washington is promoting towards Beijing, since, in this sense, Europe is still divided with respect to China and all this with the long shadow of the Ukrainian war.

Much less restrained, but just as inconclusive, Li was in his speech before the 1,500 businessmen and senior executives who have attended the World Economic Forum in Tianjin, known as the “summer Davos”. He tried to reassure investors about China’s economic growth expectations, scolded the West for calling for a “risk-off policy” and advanced that Beijing will implement “more pragmatic and effective” plans to boost the country’s growth and demand. interior, but without greater specificity.

A 30-minute speech that left a bitter aftertaste among the foreign attendees, who expected Li to instill more optimism regarding the future of China, immersed in a deep demographic and real estate crisis and an economic recovery that is not consolidating. Inflation in May was 0.2%, retail sales are down, industrial production is down, exports and imports contracted in the last month, and youth unemployment (up to 24 years of age) stands at around 21%. In short, a not very rosy picture that, however, did not encourage Li to propose concrete stimulus measures. The prime minister limited himself to promising pragmatic and effective policies to achieve the 5% of GDP target set for this year.

All this did not prevent Li from expressing his confidence in betting on stable growth in a longer-term economic cycle, which leads to a continuous expansion of the market with opportunities for cooperation for international investors in a framework of global economic recovery. A future that Li predicted after launching a harsh rebuke to calls from the West to “reduce their dependence” on China, bitterly complaining about the US attempt to try to contain the development of their country. No government or organization should decide what a given industry facing supply chain risks should do, Li explained, adding that companies are the most sensitive to economic risks and industrial challenges and therefore They should be the ones with the last word. “The government or any relevant organization should not hinder, expand, politicize or turn risks into an ideological struggle because this will cause many problems: the important thing is to cooperate,” he said.

Li is right when he says that the development of the world economy has become a community in which the whole world is intermingled, adding that the economies of interdependent countries mutually prosper and develop jointly. “And this, fundamentally, is good, not bad,” she insists. The paradox, however, is that whoever underlined it leads a country in which nothing moves without the approval of the president, Xi Jinping, which slows down its development. It is the squaring of the circle.