Here we are in the Year of the Dog, chickens behind us, and we search through the leftovers for signs of how this lunar year is going to go. While keeping in mind China’s well-proven capacity for delivering the unexpected, the economy appears in reasonable shape within the extraordinary control boundaries it operates in. The slogan of the last few years – state forward, private retreat – looks set to remain the key operating principle in the economy, the exception of course being “new economy” players who have been sufficiently integrated. Debt, property prices and the stock market appear generally stable, although some high-profile companies may still have to be bailed out. “Too big to fail” is an idea that the financial crisis in 2008-9 proved to be only partly correct in the US. But the idea seems likely to hold true in today’s China.
Externally, power circles in the US appear to have finally accepted the fact that China operates according to a different set of rules, and there are signs that Europe, Australia and others are reaching the same conclusion. A US Treasury official referred this week to China’s “patently non-market behavior.” Now, what are the consequences of reaching a conclusion that was obvious even at the time of China’s inclusion in WTO? It’s hard to say, but it surely at least means a rockier road for China in terms of trade and investment in other major markets.
Then there is the new “Quad” effort to provide an alternative to China’s Belt/Road. Quad links the US, India, Japan and Australia, and if they were able to coordinate effectively and provide countries with investment proposals that at least match those from China, which would the suitor countries go for? It’s a pity that Washington is so distracted at such a key juncture. But the world is still turning despite the Trump maelstrom and it could be that a distracted US forces other countries to make moves they would otherwise have not.
Enjoy the early spring weather!