China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

International Women’s Day – relevant to both advanced and emerging countries

March 7, 2023

 

On March 8, it is time again to celebrate the international Women’s Day. Sure, better female equality has been achieved in the past few decades. But not enough!

During a lot of meetings during the years with students, researchers, male and female entrepreneurs or corporate officers, politicians and other professionals, I have got the clear impression that the female role in supervisory boards and boards of directors until now has been regarded as – by far – the most relevant gender equality issue. However, this view is definitely too narrow though very necessary.

Instead, there is another group of corporate and non-commercial organizations with insufficient female equality: competent women in middle management and below. These women still seem to be without strong and influential lobby – indeed a shame!

Lagging statistics

One major problem in this context is the statistical uncertainty about the total relative share of women being organized under the leading positions. Better statistical estimates are desirable. Some kind of idea, however, can be found in a publication by the World Bank by the name of https://data.worldbank.org/indicator/SL.EMP.SMGT.FE.ZS (also for emerging countries). Here, the participation share of women in middle management is in most advanced countries around 30-40 percent, in the case of Sweden somewhat higher. The average seems to be located at around one third on country levels – not really satisfactory.

Altogether, the potential for improvement is still high. Analysts should be provided with much more statistics on gender equality on both broadening and deepening levels – and researchers should deal more with female encouragement and promotion on lower organization levels.

Theory and practical application from female gender research

No advanced exercises are necessary to give the “malign neglect” – as described above – an academic touch. Research on human capital formation tells us a lot about the benefits of applying education and improved competence – strongly underlined, for example, by Nobel Prize winners such as Robert Lucas and Paul Romer.

Massively improving female human capital formation also in middle female management and below could appeal to many women’s motivation and productivity – and in the longer run even to macroeconomic GDP growth if successfully spread. Furthermore, countries in particularly Europe could receive some demography-supporting input from the above-mentioned and strived gender-equality improvements.

However, theoretically possible broad proliferation of widened gender equality urges for strong practical support: from students, researchers, employers’ and employees’ organizations, male and female entrepreneurs or corporate strategists, politicians, media and last but not least from voters.

This shouldn’t be impossible in advanced countries, right?

However, also many emerging countries could work more on improved gender equality (also here with human capital mostly in the first place). If we look, for example, at the current convention of the National People’s Congress in Beijing (China’s “parliament”), the female participation rate is only about one fourth. Not really a model for the rest of the world!

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

Back to Start Page

China’s National Party Congress (NPC) – offensive growth signals

March 6, 2023

2022 was quite a poor year for the Chinese economy – with an official GDP increase by only 3 percent. This weak performance could be related to a large extent to the finally failing zero-covid strategy – a growth burden that eventually became embarrassing and uncomfortable for the political leadership. For this reason, the zero-covid strategy was abandoned unexpectedly in December 2022. I would guess that this action was a result of political emergency – with probably a positive growth impact in 2023.

How much GDP uncertainty is still there?

The abolition of the zero-covid strategy will probably give some stimulus to GDP growth this year (when applying ceteris paribus assumptions, for example by ruling out unforeseeable foreign-trade restrictions or distortions, bursting asset-price bubbles, major moves of the  exchange rate, etc.).

However, no one can be sure about the exact starting-point level of total GDP in the beginning of 2023 because of at least previously motivated doubts about the quality of GDP statistics and, consequently, a wrong GDP-calculation history during quite a long time. Have these doubts in the meanwhile become unfair or are they still in place? The new official target for 2023 year’s GDP growth of around 5 percent may be in line with statistical reality – or not (quite yet). We simply do not know.

This is exactly a situation I have been warning for since many years back. How can one recognize an existing improvement of statistical quality? There was a time when (official) GDP statistics looked too easy to predict because GDP fluctuations were kept very low from quarter to quarter – just about right to meet the official growth goals at the end of the year. Thus: Without then having applied normal quarterly fluctuations, good statistical GDP quality seemed to be quite far away during a considerable period of time leading to the explained statistical trust problem.

By now, statistical quality of GDP may have improved. But no Western analyst knows about this exactly. However, one can see that the very recently at the NPC proclaimed official GDP-growth objective of around 5 percent in 2023 surpasses the outcome of 2022 by as much as 2 percentage points. 5 percent may not be quite easy to achieve but is definitely not out of reach because of all the (possible) statistical GDP effects from the low base in 2022 and a more expansionary economic policy this year.

Altogether, it remains interesting to look at the official objective for GDP growth that was announced on March 5 at the first session of the new14th National Party Congress (the 15th NPC starts in March 2028). Almost 3000 representatives from all over the country participate in this currently ongoing annual “parliamentary” convention of the Communist Party – a convention with a usual acceptance rate for all suggestions and laws of 100 percent.

What comes up at the NPC?

Even if the agenda of the ongoing NPC session is widely known, interesting confirmations or news can be expected. In this context, one may mention

¤  the formal installation of Presiden Xi Jinping’s third (unprecedented) term
¤  the presentation of the new Premier, probably Li Qiang (also China’s no 2)
¤  the presentation of the new governor of the People’s Bank of China
¤  the government’s annual work report for developments in 2022
¤  details, guidelines, goals for the society and economy in 2023 and beyond
¤  first initiatives how to meet the crucial demographic challenges (with now  decreasing population), etc.
¤  a further strong rise of military expenditure – with a potential risk of not meeting the minus 3-percent budget objective.

The most remaining impression from the whole NPC is certainly the new and now even larger power of Chairman Xi Jinping. Also the probably new Chinese Prime Minister Li Qiang, is a close political ally of Xi. A logical conclusion should be that Xi Jinping in the future will meet more individual responsibility because of the high concentration of political power to him alone and his protégés. Looking at China’s many existing conflicts of goals, the challenge of concentrated power will not be easy to manage over time.

What s behind the new – fairly confident – GDP objective?

Finally, there may be a need of trying to elaborate a little bit more on the chosen numerical objective for this year’s GDP growth – “around 5 percent” which is a smartly chosen number, allowing for both 4.5 and 5.5 percent and everything in between. One can easily imagine that Chairman Xi Jinping definitely must have felt disappointed about last year’s weak GDP groyth and probably also worried about the emerging protests and social tensions in early winter as a consequence of the tough covid lockdowns at the time.

Thus, it certainly felt appropriate for Xi to lead the country into 2023 in a positive mood. Indeed, such a change of tone could be observed already in the past month. More optimism about the Chinese economy showed up domestically and outside China as well – strongly pushed by positive official comments but also additionally all over the whole globe by private institutions/analysts and their upward revisions of GDP for 2023.

Another psychological explanation for more optimism may have been/may be that Chairman Xi Jinping with his concrete ambition to develop China visibly into an economic global economic (and political) superpower simply did not/does want to be confronted with another weak economic year. Instead, Xi obviously wants in 2023 to contribute to more confidence on China – via some more expansionary policy action, keeping inflation down at planned 3 percent this year (as announced at the NPC), improving innovative reputation and attraction, and – also taken up at the NPC – by more open doors for foreign direct investors. Exemplified psychological tools!

Thus, we are reminded again that the analysis of China needs a lot of psychological understanding which is not easy to acquire! The Chinese often have another logical thinking than Westerners.

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

Back to Start Page

China’s short- and long-term strategies – increasing challenges for the West

February 17, 2023

In some of my recent blogs, I paid attention to China’s changing style in international relations. Or should I say President Xi Jinping’s style? It becomes more and more obvious that China has strong political and economic ambitions, also globally. This may mean that even more focus will be put on Taiwan which is increasingly developing as an important U.S. issue – both politically and economically. It is therefore necessary that also the EU – and when possible and necessary Sweden itself – accelerate the formulation of a concrete China strategy. The U.S. has already come considerably longer in this respect – with no major difference between Trump and Biden.

The new – or changing – China

Readers of this blog may have observed that I in recent articles several times have described Chinese attitude and strategy changes that started a couple of years ago, from internationally having been a relatively humble and business-minded country to nowadays presenting itself as self-confident, tougher and less compromising.

Today, China wants to export its “superiority regime model” as much as possible to the rest of the world, particularly to Africa, South America and some countries in South East Europa. China has already gained quite some influence in these continents and regions, also by granting – often expensive – new loans for infrastructure etc.

Altogether, China has become much more ideological, authoritarian and nationalist.

This change can be directly explained by the modified leadership of President Xi Jinping who in the past ten years replaced some kind of the previously collective leadership within the Standing Committee by giving substantially more power to himself. In 2013, the first year of Xi in office, the objectives by the Third Plenum with many plans – also for Westerners – toward more market economy looked quite promising. This allowed then for some cautious optimism about future economic progress – cautious optimism that, however, in the meanwhile to a high extent has been shattered.

Thus, economic policy has been landing on the wrong gangway after 2013 – not easy or even impossible to reverse in the forthcoming years or even decades. “Decades” could be the right term when including the Taiwan issue. In my view, Taiwan has to be regarded as the most complicated political and economic issue of the future for both China and the U.S. – with a lot of potential for escalating conflicts between both countries.

Taiwan – a complicated issue for the whole world

Taiwan is very special for both Mainland China and the U.S. Both countries may at some point find a reason to start a war. The official China wants Taiwan back and has not ruled out the use of force to achieve reunification -but without mentioning a certain year. Some analysts see 2049 – the 100th anniversary of the founding of the People’s Republic of China – as a possible year of confrontation, others predict 2035 when China is expecting to achieve “the status of a moderately prosperous country”. Certain China experts are even of the opinion that the price for an invasion including far-reaching Western sanctions would be too large for China – both what concerns Chinese exports and imports.

On the other hand, the belief that the U.S. most probably would not accept a Chinese invasion of Taiwan seems to be widely spread among Western analysts. One can hardly imagine what such a development would mean to the global economy.

Taiwan receives American support not only for democracy reasons but also for its close link to high-tech software. 65 percent of all semiconductors and 90 percent of all advanced chips in the world are produced in Taiwan which currently does not leave much space to Mainland China, the EU and the U.S. Having pointed at this fact, nobody should be surprised that China, the EU and the U.S. now eagerly aim at visibly enlarge their own production of intermediate IT-products at home. Infineon’s planned chip investment in Dresden is such an example.

Political priorities

Before Xi’s entry into the highest political positions, strategic foreign policy was not really an important issue for China’s political leaders. Most issues dealt with trade policy and international business relations. Now, foreign policy is judged as very important since President Xi wants to see China as the most influential country in the world.

The revival of active foreign policy means all the same that China also applies strategic policy objectives at home with new policy tools that have been explained above. New domestic policy tools and objectives are indeed badly needed for Chinese leaders in order to divert the people from the disappointing economic performance – divert by using an ideological, authoritarian and nationalist stance in communication with the Chinese people.

Conclusion:
The analysis of China is about to become increasingly difficult – particularly when including the Taiwan issue. It is quite new in a way that China and President Xi want to become more powerful in a global perspective, not only at home by the authoritarian and nationalist leadership style. Western companies should observe these ongoing changes of Chinese political leadership.

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

Back to Start Page