Hands across the water

The most interesting news of the week was a meeting Beijing between Mr Xi and the former president on the island, Ma Ying-jeou, but it is hard to say what significance it has. Ma represents the opposition party on the island, and the whole issue of Taiwan’s future is up in the air and clouded in mystery. The hints provided at the meeting, following on from the vibe at the Xi-Biden meeting in San Francisco last November, are that: 1. Independence is a no-no; 2. We’re not planning anything any time soon; 3. We’re happy to talk to anyone not in favor of independence.

Where does that leave things? On the assumption that the goal is maintenance of the status quo, then the best-case scenario is that meeting may have bought some time. Meanwhile, China’s military expansion continues. But the single biggest issue that impacts on this situation, overshadowing everything else, is the US presidential election. If Trump wins, all bets are off on everything all over the world, including the island, in our view. If Biden wins, then we would be inclined to believe the status quo is sustainable for the foreseeable future. There is always the possibility, discussed many times here and elsewhere, that they have made their decision and chosen a deadline and it’s just a matter of timing. But there is also the possibility, depending on how things go in the US election and in the Ukraine War and Gaza, that the pressures to leave things alone and not take the risk will be overwhelming. For this year, our prediction remains—no change.

So, how is the Chinese economy doing? The government is working hard to send out welcome messages for foreigners, and there are some more coming in, it’s true. But it’s a trickle compared to 5 or ten years ago. The moment passed. Meanwhile the credit agency Fitch downgraded a slew of Chinese companies in the face of the difficult economic situation. Goldman Sachs, on the other hand, issued a fairly positive assessment of economic prospects, but we at least discount that. The bulls of Wall Street have little credibility in the China field.  

Lastly, there was a report that China bred an average of one new unicorn each week last year, largely due to growth in the AI. The nation reportedly added 56 unicorns—start-ups valued at more than $1 billion—in 2023, trailing only the US, which minted 70 unicorns. Listing is the next challenge for these companies. May they all succeed!

Have a great weekend.