With the Party Congress behind us, China faces the next steps. Lots of study of materials for party members, lots of guessing by the markets as to what the new administration possessing the China equivalent of control of both houses of Congress, the White House and the Supreme Court will do with its overwhelming control. There have been questions asked for years about what the goal of the consolidation and aggregation of power was all about. Would it herald in a wide range of reforms? All we can see so far is that the party’s current confidence of control may be allowing it to face the possibility of slower growth rates and even economic recession in some regions in order to help clean up the environment ruined with malice aforethought in the rush from 1989. The reason is that pollution provides a focus for discontent. The overall “real” economy, meanwhile, seems to be doing quite well, a reflection perhaps of a general global upturn in economic prospects. Trends including ever-greater use of AI and mobile money, and the consolidation of Internet business into even more controllable lumps, assist.
The big news in the coming week is going to be Trump’s Asian trip. A day and a half in Japan, the same in South Korea, then two days plus in China. The Chinese have huge experience in ego massaging, and that’s what we expect lots of. They will give something to Trump on North Korea and trade, but not much. Enough for him to claim a stunning victory. This is the right time for a US President to come to China and do serious discussions on the future of the global system and China’s role in it. Unfortunately Trump is not the right president for the job. He is so easy for the heirs to Sun Tzu to manipulate. Have a pleasant weekend!