China Research

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

More good news from China than usual – in which areas and for what reasons?

December 8, 2020

Following the Chinese press, there is currently an increasing accumulation of positive news – at least according to my own interpretation or feeling.

Thinkable reasons for the frequent positive reporting

There may be different reasons for all the positive reports, such as – pointing with the eyes of the political leadership (without ranking) – at

1)  a successful management of the corona crisis – also for the economy

2)  the successful RCEP agreement on (gradual) free trade, driven by China

3)  the obvious possibilities of improved ties to other Asian countries

4)  the strong high-tech development, particularly of IT but also the moon landing

5)  the official end of poverty, and particularly

6)  meeting the marketing needs of the Communist Party (CP) for the celebration of the 100 year anniversary of its foundation in 1921.

More examples could be mentioned. In each of these six examples, one can find strategic objectives, both in the short and the longer run. Contrary to most other nations in the world, China manages to apply both short-term and long-term thinking simultaneously.

I have wondered for a long time why this is the case and found two probable reasons for this. The first one may be linked to China’s Confucian roots. The second one can be explained by China’s authoritarian political system, meaning that a democratically elected government by nature is more short-sighted – very much in line with the research of Nobel Prize winner James Buchanan who focused on politicians’ major driving force: to do everything to be re-elected.

Recent positive contributions to the anniversary particularly important

Getting back to the initially mentioned examples of currently even more positive reporting than usual by Chinese media, more detailed exemplifying may be added.

Ad 1)  Looking into the official corona numbers, China had been very successful in fighting covid-19, also in absolute terms much better than, for example, Sweden. We know, of course, that China locked down the country very drastically – and particularly the city of Wuhan. However, since China’s history of transparency and statistical trustworthiness hardly had been encouraging during the years, there is no chance of judging the accuracy of the previously reported numbers. The total official numbers could be roughly correct, slightly wrong or very wrong. However, at least in the past two or three quarters, Chinese corona numbers should have developed more correctly. If not, digital sources would have informed the rest of the world.

Ad 2)  The free trade agreement RCEP between 13 Asian countries plus Australia and New Zeeland a few weeks ago made the Chinese very proud. This was a strategic masterpiece by China’s political leaders who recognized the great chance of a major cross-border trade deal after the withdrawal of the United States and President Trump from the Trans-Pacific Partnership (TPP) in January 2017, based on Trump’s misleading dogma of “America first”. This unwise decision made China to act and to outsmart the United States. RCEP will certainly be presented as an outstanding example of great international recognition for the People’s Republic.

Ad 3)  China is, of course, the leading country in the RCEP area with its totally 2.2 billion people population. This position will increase China’s influence both regionally and globally – ceteris paribus at the expense of United States and Europe. Recently, China, Japan and South Korea were described as the main driving forces for the RCEP agreement – a position that all three countries regard as favorable, de facto meaning a further strengthening of China in especially East Asia. A good example for the Chinese leadership to explain successful international cooperation and influential progress – particularly via media – can be found, for example, in https://www.chinadaily.com.cn/a/202012/01/WS5fc5d8fba31024ad0ba991ad.html.

Ad 4)  In recent years, CP leader and President of China, Xi Jinping, could be noted many times when addressing the decisive importance of technological progress,  positive changes in the value-added chain and quality improvements, see below https://www.chinadaily.com.cn/a/202012/02/WS5fc6c3eaa31024ad0ba992b0.html. Without major improvements in these areas, China has no change to replace its non-competitive products and exports – and, consequently, create better conditions for the economic, social and environmental future. Positive news that currently are spread among many others are excellent international IT rankings and what officials call the “leapfrog development” of IT, the recent moon landing not to forget.

Ad 5)  China has recently officially declared the end of poverty which certainly is a good topic for headlines in media https://news.cgtn.com/news/2020-11-23/China-eliminates-absolute-poverty-one-month-before-schedule-VEp8VAJJS0/index.html

It should be not underestimated that this development probably can be regarded as the most positive historical achievement of the CP during the past 100 years. However, the increasing uneven distribution of income remains a burdening problem.

Ad 6)  Here we have the everything else outstanding explanation for China’s current  increase of its success marketing: the forthcoming CP-jubilee year of 2021.

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

 

Back to Start Page

RCEP – benefiting from “America first”

November 16, 2020

Only yesterday – on October 15 – the Regional Comprehensive Economic Partnership (RCEP) Agreement finally was signed after eight years of complicated negotiations, altogether over 30 rounds. https://asean.org/storage/2020/11/Summary-of-the-RCEP-Agreement.pdf

These negotiations included the ten already co-operating ASEAN trading partners: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, The Philippines, Singapore, Thailand, Viet Nam and the five “deal newcomers” of China, Japan, South Korea, Australia and New Zealand. These countries amount to as much as 2.2 billion people or around 30 percent of the global population and GDP.

Without more detailed information right now one may conclude that RCEP – after all national ratifications – will be the starting point for the largest free trade zone in the world. Initially, President Obama and the U.S. wanted to be part of the negotiations as well. This plan was shattered by President Trump and his “America first” policy; certainly not a good idea – not even for the U.S. itself.

Comments – the U.S. and the EU in a weakened position (Sweden included) 

¤ Right now: China the main winner – the U.S. and the EU the main losers.
No further explanation is needed to underline that China clearly sticks out as the most powerful economic player of the 15 RCEP countries – in regions geographically not too far away and, consequently, already China’s main trading partners when summarizing the whole RCEP area. The objective of the trade agreement is to include over 90 percent of all traded goods for free trade and roughly two thirds of all cross-border traded services according to the following official source: https://www.mti.gov.sg/-/media/MTI/Newsroom/Press-Releases/2020/11/Press-Release-on-the-Regional-Comprehensive-Economic-Partnership-Signing.pdf.

However, some applicable time horizon cannot be found in available documents. Usually, it takes quite some years until major trade agreements have come into place completely.

¤ Really “fait accompli”?
Currently, I do not see toughly pressing obstacles for the introduction and – later on – continuation of the RCEP. However, new events sometimes change things. We still do not know about the speed of the complete abolition of all the different tariffs – may be much more slowly than many experts assume today.

Furthermore: Will President (Elect) Biden work for an American joining later on which would include new negotiations? We never know. But we probably can expect that Biden will be looking for (somewhat) more relaxed relations to China –whatever this may lead to.

¤ The EU needs much more cross-border co-operation in Asia – but not with India or China.
The EU’s trade with the expanding 14 RCEP states (China excl) is, of course, much more limited than China’s. In my view, only a much more co-operative EU will have a chance of really successfully being able to compete with China in the other RCEP countries.

However, it would be wrong to see India as an alternative to the RCEP. The answer can only be RCEP and India which has been suggested. Besides, India has been invited again to join the RCEP. This is not in line with current Indian ambitions – but who knows what will happen in 10 years or so?

¤  Return to a multilateral trade treaty – indeed good news.
In recent decades China and the U.S. have developed more and more into promoters of bilateral trade agreements. Theory and research, however, prefer clearly multinational trade deals.

The RCEP finally means a step into the right policy direction!

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

 

Back to Start Page

China and the U.S. election

November 3, 2020

During my many visits to China I used to get the impression that the Chinese mostly looked at the U.S. with mixed feelings – feelings that also included some kind of admiration. The American dream of developing from a poor origin to a wealthy person attracted many Chinese on micro levels. Some kind of capitalist socialism or vice versa was born in the 1990s.

Politically, China and the U.S. kept quite some distance in the new millennium all the same. Tensions continued during Bill Clinton’s presidency but his support for China’s entry into the WTO in 2001 was appreciated. This move turned out to be the main driver for China’s rise to become the largest economy in the world (in terms of total GDP and PPP), together with the simultaneously ongoing globalization. President Obama’s relations to China had a number of ups and downs as well. President Trump, finally, could be increasingly regarded as an opponent to China during the past four years.

In 1997, professor David Shambaugh wrote in Current History (September) that “China and the United States are likely to be the dominant world powers in the twenty-first century. It is imperative that these two continental giants learn to live and work together productively and cooperatively”. Altogether, the conclusion above on the two leading world powers turned out to be right – but the recommendation of working together did not really come true, particularly not in the past four years. Biden could make some difference – but probably not in a significant manner.

The Trump years of 2017-2021 – and now?

President Trumps leitmotiv of “America first” did quite some harm to China, the global economy and also to the U.S. itself, particularly due to the revival of protectionism. This is certainly a bad development. But what do the Chinese themselves feel about today’s election?

Despite many unfriendly words from the Trump-administration, the Chinese support Trump’s aversion or doubts against traditional allies such as NATO and his attempt to weaken American (Western) democracy. Chinese media also take the chance of describing the superiority of its authoritarian system, exemplified by what the official China calls the victory against the covid-19 crisis. China remains the top issue for the Chinese and certainly not the U.S. The result of the presidential election in the U.S. does not make a major difference – neither to President Xi Jinping or the Chinese people (according to my own understanding of Chinese press). However, there is no clearly visible preference for Biden either.

Competition with the U.S. will remain the keyword for the future of China – when it comes to the economy, technology, research and military power. However, in my view three possible and necessary changes may happen in the future with a President Biden: a (somewhat) stronger priority of  the environment, a (somewhat) better political predictability and a more polite style of communication between the two superpowers.

And we should not give up hope for better cooperation!

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

 

Back to Start Page