China: a chronicle of change – Telos

January 24, 2023

I moved to Beijing in 2018. I was immediately intoxicated by the frenetic pace that animates the megacities of the country. Being able to experience this stark contradiction means that in China everything is very complicated, but at the same time everything is possible. And above all, every day you need to win with the energy and agility of professionals who show you that everything is done here faster than anywhere else. Furthermore, as someone passionate about innovation processes and the advancement of the digital economy, I have reason to marvel at the progress of the Chinese tech giants, who are massively transforming payment usage in mobile, generalized e-commerce everywhere. more than 60% in China and less than 20% in France) or Live broadcast as a communication interface.

Four years later, two without leaving the country under the constraints of a zero-Covid policy, I left Beijing in a very different climate. In an almost Orwellian atmosphere, I discovered that our plane was the only one announced on the hopelessly blank screen. After the obligatory search of the bags and a health check like no other in the world, it remains to board a bus to reach the plane, which is parked on an isolated tarmac, as far away from the halls of residence as possible. As a metaphor for China, visitors from the West must now be kept away from the population as requested by Xi Jinping.

But what happened between 2018 and 2022? During those four years, I had the impression of living history in motion, of witnessing a complete change. And its consequences continued to spread to the rest of the world after the pandemic, in increasingly radical forms of globalization or war in Ukraine.

Announced change

We’ve known since the mid-2000s that the growth of the Middle Empire economy, which had consistently enjoyed double-digit GDP growth during China’s “Glory Thirties” that began in the 1980s, would come to an end. reaching a turning point, entering a new period of development. Growth fell below 10% in 2012 and has not risen above that since. President Xi Jinping’s ascension to power in the same year also faced the challenges of preparing the country for weaker growth and containing potential future claims.

Deng Xiaoping’s famous speech to the Chinese people, “Get rich! “, to maintain an open pact based on social peace, announced in 1992, which for more than three decades has allowed the economic aspirations of the middle class of more than 400 million people, the largest in the world, to be left to the sole control of the Party.

This is indeed what I witnessed during my four years in China: the gradual political takeover of the few spaces of freedom permitted by economic growth and opening to the world. Application of my old courses, which describe the succession of periods when economics took precedence over politics, as a real measure, from Diocletian’s “maximum edict” (301 AD) to Maoist Culture to Soviet planning. Revolution in China today.

Approaching crises

It was Chairman Xi’s second term that opened in 2017, marking the end of the game for an endlessly curious and creative civil society, with increased personal control and content censorship for the first time in their history. Number of new video game releases in 2018 for more than six months.

I witnessed this singular acceleration of these measures until the onset of the pandemic and the “Zero Covid” policy implemented in early 2020 isolated the country. The almost immediate restart of the country’s economy, spectacular in March 2020 when the rest of the world was on its knees, was hampered by an accumulation of crises that have since been dubious.

Some of these challenges are purely internal because they are directly related to government choices. First, the “zero Covid” policy, which lasted indefinitely until it was suddenly lifted in December 2023, increasingly weighed on China’s economy at the rate of arrests and repeated shutdowns of hundreds of millions of households. the smallest companies to large industrial centers.

The general weakening of the economy led to a large-scale real estate crisis that directly affected more than a quarter of GDP and enriched a section of the middle class that benefited from the real estate bubble and had difficulty accessing property. is a very important social indicator.

Finally, the digital sector, a powerful vector for the transformation of the economy and providing attractive jobs for young people, entered a spiral of systematic regulation in 2020. A series of measures aimed at controlling the sector, whose hyper-growth began only in 2010, took some time before the government decided to act. Depending on the case, these were anticipatory actions (abuse of a dominant position, anti-competitive actions, elimination of poorly managed financial practices, protection of minors, etc.) and in other cases an expression of an authoritarian (replacement) desire. provision of founders by executives loyal to the regime, access to personal information, etc.). All these measures have weakened the digital giants (Alibaba, Baidu, Pinduoduo, Tencent, etc.), although at the global level Tech leaders have entered a phase of cost and workforce rationalization.

Another part of the current challenges is related to the international context. The Middle Kingdom has entered a phase of confrontation with the United States and Europe, which is characterized by a separation that is still difficult to define in the economic and technological spheres. China mobilized the US at the end of Obama’s second term with the “Made in China 2025” plan, which aims to accelerate the country’s technological autonomy from 2015, and then responded by identifying strategic sectors during the presidency of Donald Trump. Protect Chinese companies from being “blacklisted”. This decoupling, desired by both sides and fueled by the pandemic, draws attention to vulnerable sectors and weakens supply chains under strain.

The standoff has been exacerbated by the war between Russia and Ukraine, which has put the CCP leadership on the wrong foot and added an ill-timed energy crisis to the diplomatic crisis. Exports, on which China’s economy is still heavily dependent, showed their first decline since 2020 (-0.7%) in early 2022 compared to October 2021 after recovering in September 2021 (+5.7%) ) noted, while sluggish domestic demand has not yet been observed. accepted by the authorities as expected. With pay cuts in the administration or non-payment in the private sector, the Chinese are putting themselves into survival mode, buying less and walking out.

Overall, the conservative 5.5% GDP growth target for 2022 was revised down to 3% (compared to the Asian average of 4%) in March 2022. The earthquake, like a deadly aftershock, resulted in an official unemployment rate of 20% (probably lower than reality) for young graduates, forcing these young people into low-skilled and low-paying jobs. This young man, who we know is under pressure, expressed it magnificently for the first time in thirty years with a blank page in the big cities of the country.

Keeping China on our radars

As China departs from its “zero-Covid” orthodoxy, it’s hard to say where the new model will stand in the bewildering improvisation. Many are betting on a gradual and controlled reopening without a return to pre-pandemic conditions.

What then will be the viability of a model that separates two increasingly divergent Chinas, a China that has always been self-absorbed for domestic, obsolete and political reasons, and an external China that is ahead for economic reasons? The impact of the project on all continents of China?

If the regime continues to question the openness to the world that has made it prosperous since the 1980s, will it be able to keep its promise of becoming the world’s leading technological power by 2030-2040?

And will China still have the funds to sustainably finance all the very ambitious programs it is simultaneously developing: capturing the semiconductor and civil aviation industries, investing in futures like quantum computing or artificial intelligence, maintaining these huge investments. While digitizing many strategic areas such as agriculture, healthcare or industry in BRI (Belt and Road Initiative) projects, energy infrastructures (nuclear and renewable), military and ambitious space program?

Despite the accumulation of these uncertainties, we must be careful not to look too far. A weakened China is not out of the game, we must continue to study it more than ever and adapt our French and European policies to Chinese ambitions.

First, because China continues to innovate on a large scale. For example, with the marketing of mid- and high-end cars from Nio and BYD, its leadership in electric cars is beginning to be seen in Europe. Above all, it is necessary to understand and study the areas that are less visible, but where China is making rapid progress: smart city, smart logistics, green factory or finance the future.

China also remains one of the largest markets in the world and will remain attractive to Western companies with an offering that matches the competitive landscape and consumer expectations. While players such as Amazon and PSA have reduced their presence in the Chinese market in recent years, major European groups such as Airbus, BASF, Renault and VW have recently strengthened their ties and investments in China.

More surprisingly, this is also the case with French startups that have just entered the Chinese market, despite the virtual impossibility of visiting the country in person. As the president of La French Tech Beijing, the companies I have the opportunity to cooperate with are, for example, TrustInSoft, a top specialist in software security and safety, MWM, the world’s leading software publisher, Eatwith, one of the world’s leading companies. leading communities for authentic culinary experiences with locals, or Gamifly, a tool for managing the interactive experience of fans in video games and entertainment.

Leave a Reply

Your email address will not be published. Required fields are marked *