Well here we are, in a whole new year! The first sense we have is that the Center is perhaps maybe possibly planning a charm offensive in various areas, including foreign policy, private enterprise and foreign investment. We’ll see how that plays out, the key issue being the perception of sincerity. But with the COVID peak passing about now nationally, presumably, and the borders supposed to open totally and unconditionally on Jan 8, just two days from now, not to mention the start of a brand new year, this would be a good time to try a new approach. Not that we don’t agree that Marxism is well worth a deep ponder. It is. But let’s get the economy going, and to do that requires confidence and cooperation. Q4 numbers are bound to be awful, but the view of the Center seems to be—let’s just make 2023 better, and use the low 2022 numbers as a good springboard for percentage increase figures which look jolly. How to make 2023 better? The impression we have is that the Center is pushing for big bailouts of the property sector, and big supply side infrastructure expenditure at the local level to stimulate economic activity. But these moves don’t necessarily impact on the core questions, which are how to stimulate consumer spending and private enterprise investment. The initial impact of opening plus the passing of the COVID peak will be a boost in consumer spending—but will it be temporary? Our view remains that the overall attitude of consumers and investors has shifted from generally positive to generally negative. Household savings rates have shot up dramatically over the past year, which seems to indicate a prudent management of family finances and no splurging. So getting people out and spending again rather than saving against a rainy day—difficult.
How about foreign investment? Following the COVID madness at the Foxconn plant in Zhengzhou which makes almost all iPhones, Apple is continuing to diversify and announced a deal this week for shifting some of the production away from Foxconn to another Chinese company. Meanwhile, Apple’s production outside of China of MacBooks, iPhones, iPads etc is also expected to shift over the next few years, coming down from close to 100% across the board towards 90% or even 80%. Even that percentage change results in massive amounts of revenue moving from one part of the world to another. The efficiency of Chinese workers and the production ecosystem of China are both unbeatable, it’s true, but diversification of risk is now essential for many companies, and automation is presumably going to make factory location less and less of a factor as time goes by.
Anyway, internationally, the war in Ukraine drags on and it’s hard to see it ending happily for Mr P. Meanwhile, in the US, the House of Reps Speaker farce is providing a good lesson in democracy, and also showing just how deeply and negatively the poison unleashed by Trump is affecting the system. There’s no direct China impact here, but if the result of all this, including the indictments about to be unveiled, serve to categorically humiliate Trumpism and MAGA, then it will strengthen the US system at the expense of others. Or so it seems today. Watch this space, and have a great weekend!