The Chinese Mess

No one dares to claim anymore that China will soon become the world’s largest economy. From Goldman Sachs which announced fifteen years ago that it would be number 1 in 2026, to Nomura which predicted it for 2028, to JP Morgan which saw it by 2031… The question with the experts was not so not so much if, but when, the US economy would be supplanted in its pole position. This prospect now seems very uncertain – no longer relevant at all in fact – as the cards have been reshuffled in recent months, thus fundamentally calling into question all the parameters.

From the outset, an observation impossible to miss: while all the central banks are raising their interest rates, China is the only nation with a major economy on a planetary scale that is lowering them. The Chinese authorities can no longer hide the gap which is widening more and more with the United States and which is currently around 8.3 trillion dollars against 5.3 trillion again last year, according to calculations made by the former head of the World Bank, Bert Hofman. China’s insignificant inflation and weak national growth, but above all the weakening of the Yuan and the substantial appreciation of the greenback, even cause the economy of this country to suffer a recession when the parameters are expressed in dollars! It can no longer even claim to be the Asian locomotive because – for the first time in 25 years – the growth of Indonesia, Malaysia, the Philippines and Vietnam exceeds that of China.

Outside, Xi’s credibility is therefore now in question, he who never ceased at the slightest opportunity to declare that the East would very soon overtake a declining West, and to hammer home that his country was on the point of outclassing the USA. Seen from the inside, the Congress of the Communist Party just closed in a resounding proof of his absolute control. His power is effectively total today, following his resounding anti-corruption campaign which mainly consisted of purging his opponents along with those who doubted his governance. After thirty years of tremendous growth – the most impressive in the world! -, after the construction of cities of astonishing gigantism, the manufacture of high-speed trains, the system put in place by the great Deng Xiaoping has now been rendered obsolete by Xi who is – by far – hardly a first of between equals because he erects around his person a cult worthy of the Mao era.

When the Party rewarded competence, when successions were made by consensus, when industrial strategy was worked out in the provinces, Xi’s governance essentially consists of favoring loyalty over merit, clearly inducing a profound distortion within the whole decision-making process. By removing this trickle that distinguished talent across the country, by suppressing all criticism, human errors, those of one man – in this case him – turned into failures with disastrous consequences: his questionable decision to abandon the real estate market to its collapse, his witch hunt against the country’s technological giants, his incredible stubbornness to pursue Zero-Covid going hand in hand with totalitarian surveillance, the putting under his boot of Hong Kong… Flagships like Alibaba and Tencent – today broken – were nevertheless an indisputable proof of creativity on the part of China.

What if Xi was fundamentally changing Chinese society?