The unsung star of the World Economic Forum in Davos last week was not a head of state, but the Chinese Politburo member Liu He. The 66-year-old is a trusted confidant of President Xi Jinping and will soon be appointed vice-premier to oversee the Chinese economy.
Last year in the Swiss ski resort, Xi stole the show with his keynote speech which outlined globalization with Beijing at the forefront. Now, his trusted chief economic adviser has taken the plaudits.
Liu emphasized, like his ‘boss’, that Beijing is against protectionism and that China is committed to sustainable growth. He also stressed the importance of economic reforms, which would “exceed the expectations of the international community.”
On an array of aspects, the dragon is on fire. Chinese debt is mostly internal, and in yuan, while the economy is fast becoming more productive through high-tech solutions such as big data. The transition from an export-fueled business model to a knowledge and innovation economy has been hyper-fast and relatively successful.
Still, red flags remain. Lou Jiwei, the chairman of the National Social Security Fund Council, has warned that China’s financial system is “severely distorted” and has “systematic financial risks.”
On a macro level, concerns persist about how long Beijing’s campaign to “de-leverage the financial sector” will take. There are also worries about the willingness to reduce “off-balance-sheet exposure” in the banking sector. Finally, there are fears that a “squeeze on local government funding could also hit infrastructure spending.”
Against this backdrop, the People’s Bank of China deputy governor, Yi Gang, has been hinting that ‘shadow banking’ and online finance operations will merit special attention in the central bank’s “macro-prudential framework.”
Yet for many, China’s digital ecosystem has been billed as one of the wonders of the ‘new’ world. A detailed report revealed how it is responsible for 7% of China’s gross domestic product and worth more than the GDP of France or the United Kingdom.
The all-powerful BATX, of Baidu, Alibaba, Tencent and Xiaomi, alongside Didi Chuxing, the Chinese Uber, and tech giants JD.com and Huawei, are practically a state within a state.
Major breakthroughs in voice and face recognition have helped transform business life in rural China. According to the Boston Consulting Group, there are at least 751 million internet users in China, which is more than the United States and India combined.
Coupled with that, expansion is virtually unlimited as only 54% of the population is connected compared to 77% in the US and nearly 90% in Japan and South Korea. And it certainly helps that Google, Facebook, Instagram and Twitter are not present in the Chinese market.
The inevitable trend is for China’s digital ecosystem to keep driving internal growth while, in parallel, the New Silk Road, officially known as the Belt and Road Initiative, generates external growth.
Wang Yi, the Chinese Foreign Minister, recently set out plans to expand the Belt and Road’s reach to Latin America. He outlined the blueprint in Santiago, Chile, during the second ministerial meeting of the China and the Community of Latin American and Caribbean States Forum.
So, the new ‘Silk Road’ infrastructure push now takes in Eurasia, Africa and Latin America. The West sees it differently, of course, tending to lump “hard and soft power” as the “China threat”, according to the Chinese state-owned Global Times.
The US National Security Strategy took it one step further, defining China, alongside Russia, as a “strategic competitor.” In American ‘think tankland,’ opinion used to be split between the so-called ‘panda-huggers’, who favored engagement, and the ‘dragon-slayers’, who favored confrontation and sanctions.
A case can be made that the dragon slayers are in the ascendancy. This evokes the familiar specter of a trade war, with US attitudes hardening against China as a geopolitical and geoeconomic rival, mixed with a charm offensive to seduce fellow BRICS member India.
A concerted Washington attack on Chinese trade policies may be all but inevitable. Complex global supply chains will suffer, while prices inflate. Naturally, Beijing will move key pieces in its global asset chessboard, which could affect US bonds and equities.
No one will profit from a trade war between two huge, interconnected economies accounting for nearly 25% of global trade, 20% of global services, and more than a third of global output.
Yet even if that was to happen, it would not be enough to halt the long profitable march of digital China.
The Middle Kingdom continues to march forward!!
Pepe is an evangelist for China, Russia and the BRI. So it’s noi surprise that he hates America. Therefore it is also no surprise that he distorts Trump’s views and approach to the international community and trade. Trump sees China and Russia as competitors rather than enemies. I’d sy that is refreshing and accurate and there is nothing wrong with that. It doesn’t mean war, it means competition. Great! There hawks and doves in all countries but Trump is our leader and his views dominate.
Evil contains the seed of its own destruction. In his inexplicable adulation of everything Chinese Pepe fails to take note that what did not work for the West may not work for China too.
The Primal Question of Existence is Survival, Growth, Evolution (SGE). After the demise of Sunni Kaliphate, Christian survival was assured, and after expulsion of Sunnis and Jews from Spain the West grew and evolved, when West was on firm moral footing till it abandoned the unity of Jesus.
The intellectual, moral, scientific, and technological growth of 17-19th century was based on unity of mankind and universality of West’s message. But with 20th century renaissance unity morphed into impressionist dispersion, quality into quantity, and algebraic formula into digitization. After the 1914-45 suicide of the West, the onset of computer has also coincided with the slow demise of the West that is today below replenishment. All that technological "advance" has not helped the West with SGE, the only game in town.
For last 50 years all technological innovations have come out of Asia – Total Quality, Kanban, JIT, FMS, Robotics, et al, while the West concentrated on use of computers for design and analysis, and lost. Will China, or Asia at large, do any better with digitization?
How could the US conduct a trade war? It has no troops, no generals, no strategy and no reserves. Putting a 30% tariff on virturally everything sold at the Walmart or Home Depot and then having China switching its soybean purchases to Brazil and their beef imports to Argentina is sure to be popular.
Pepe tends to be overly enthused no doubt. Our Latino friend is an idealist wishing for a more equitable world with less poverty and injustice. A world which most people won’t have to fight each other for the leftover crumbs "generously" given by the West. Right now China and Russia represent that ideal…an ideal that is in free fall in his home base of Brazil.
Digitization is ancient in China. From Taoism Ying Yang represent 0/1. Paqua is 3 bit binary number if U take solid line=1, dash line=0, representing 8 possibilities. The hexgrams in I Ching are 5 bit binary numbers representing 64 possible outcomes although this has forgotten and relegated to fortune telling. https://en.m.wikipedia.org/wiki/I_Ching
https://www.google.com/search?q=taoism+symbol&prmd=inv&source=lnms&tbm=isch&sa=X&ved=0ahUKEwjJw6T_24PZAhVJw2MKHenPA0oQ_AUIESgB&biw=360&bih=560#imgrc=EVjTQLkItS3PPM:
I’ve read for only a half an hour the detailed report referenced (https://www.bcg.com/publications/2017/retail-globalization-china-reveals-future-shopping.aspx). It is staggering not only for the figures concerning China’s digital economy. The general trend does not predict ascendancy, it confirms it. While the digital complex is articulating, the largest canvas paints to an education-based society in toto. Here in the United States the complementary devolution is marked by a weakened and truncated knowledge industry, if you can call it that. Regardless, whatever it is here, the referenced document concerning China’s now lightning advancement is a wonder to contemplate.
George Silversurfer The aspirations you express and you assign to Pepe have been around for all of my 79 years. The world does not wish to cooperate. I contest your assigning these aspirations to China and Russia. China cleverly has a strategy in BRI that benefits countries but the purpose is to give them the ability to benefit China. It’s OK, but hardly born of idealism. Russia…. Like the pursuit of the New Sillk Road, the resurgence of the Persian Empire, the resurgence of the Ottoman Empire, Russia pursues the resurgence of the USSR.
Art Laramee sad comment.
"A concerted Washington attack on Chinese trade policies may be all but inevitable."
It will hurt the US much more than China. If this is what it takes to deflate the US moronic empire then so be it.
Art Laramee "Russia pursues the resurgence of the USSR." What neocon warmonger nonsense!
Arius Armeniian Really? Maybe you have a different explanation for Russia’s behavior.
McKinzey, they always got their eye on the money. Est. 1924(?) and recently reorganized the CIA during Obama’s adimistration
Another shitty column by the Sino ass kisser Escobar.
Pepe doesn’t hate anyone. Perhaps you follow the old "Pax americana" giudelines, whice are declining by these years..