In both cases, different readings can be given: Both with the “zero Covid” and with the demonization of the capitalists, Xi had made serious mistakes that are weighing on the country’s economic growth; On the other hand, the autocrat showed that he was more flexible in correcting his mistakes (although he never admitted them) than was generally expected. A final note on the entrepreneurial class: the great exodus to Singapore perhaps shows that they are not overly confident, preferring to seek refuge abroad should they fall out of favor again.
The slowdown in GDP, the hopes for recovery
In the background is the slowdown in growth. In 2022, China’s GDP grew by 3% according to official figures, well below the +5.5% target proclaimed by Xi Jinping. Excluding the slowdown in 2020 due to the collapse in exports in the first year of the pandemic, this is the worst reading since 1976, the death of Mao Zedong. It’s possible that the sudden lifting of all Covid restrictions (lockdowns and quarantines) will revive growth and there have been some promising signs over the last month. However, the economic outlook has also deteriorated as Chinese private capitalism has suffered from a hostile government stance in recent years.
Capitalists out of favor: the allegations
It all started with the hunt for billionaires accused of being corrupt or just too opulent; then came a crackdown on Big Tech; general restrictions on foreign investments have been added. In all these offensives, the official motives were noble and at least partly justified. Corruption exists and certain entrepreneurs have prevailed by taking bribes. Big Tech in China has been the protagonist of excesses like in America: abuse of dominant positions, blatant monopolistic behavior, exploitation of employees, plundering of consumer privacy. Little caution has been exercised in foreign investment, and some Chinese companies have made mistakes. But behind seemingly noble intentions, Xi engaged in witch hunts, settling scores with political opponents, pursuing businessmen who seemed to outshine him or disobedient to the Communist Party. I told the story of Jack Ma, the founder of Alibaba, who was forced to step aside. Xi has created an atmosphere too hostile to private companies in recent years and has practiced a systematic bias towards state-owned companies. This can only punish the dynamism and creativity that have fueled Chinese growth over the past thirty years. If we add the western headwinds to globalization, there is reason to be pessimistic about the prospects for the Chinese economy in the medium to long term.
Stop the purges, long live the private individuals
And here are the “counter-order comrades”. A revisionist wind has been blowing for weeks. A few days ago, Xi Jinping was very clear. At an entrepreneurs’ conference, he expressly announced the turnaround: “The country will promote and support the private sector without hesitation.” The witch hunt is over, the purges of entrepreneurs have raged enough, now Beijing needs them again. In addition, Xi has ordered banks to start lending money to builders again in an attempt to save the real estate sector from a crisis that has been going on for years. Here, too, the turnaround is spectacular because Xi himself wanted to heal the speculative excesses of this business; In view of the collapse of the real estate market, he now has concerns, better the speculation about the crash. The positive surprise, I repeat, is that Xi corrects himself, albeit belatedly and without ever acknowledging his mistakes. But not everyone is convinced of his repentance.
January 21, 2023 11:45 am – Change January 21, 2023 | 11:45 a.m
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