The World Economic Forum’s annual meeting in Davos began earlier this week in the Swiss resort town with a welcome returning guest: China. The nation sent a delegation to the WEF to signal to global investors that their three-year hiatus from international economic activity had ended. But it is hard for investors to forget China’s harsh actions in recent times, nor can they see an easy path forward given COVID’s rapid, albeit delayed, dispersal throughout the country. And two key statistics are hanging over the return: China’s population shrank in 2022 for the first time in 61 years, and GDP slowed to 3 per cent, well below the nation’s benchmark for decades.
Liu He, a senior Chinese official, attempted to reassure the Davos audience by assuring that the COVID crisis in the nation was already past its peak. Yet it seems that China, in some ways, is past its own peak. In 2017, China’s President, Xi Jinping, came to Davos with a clear statement: China would be taking over global economic leadership after Donald Trump’s election and the Brexit vote. But China’s power has waned since then. The US and Europe have improved their relationships since Biden took over from Trump, especially since Russia’s invasion of Ukraine. Russia is isolated and has very few allies, and China is among them. Analysts fear that China is allying with Russia because it plans on making a similar move with Taiwan, setting off alarm bells throughout the world’s democracies.
Facts and Figures
Politics aside, businesspeople are most worried about China’s shifting demographics and economic growth forecasts. Population declines are bad for business since they eventually lead to labour shortages and decreased economic activity. A 3% GDP for 2022 is great for most nations, but China is known to heavily inflate its numbers. The 3% rate demonstrates just how bad the Zero COVID policy was for China. Evan S. Medeiros, a professor of Asia studies at Georgetown University, but it well when he said “The entire international business community is way more negative about China over the long-term. A lot of people are asking, ‘Have we reached peak China?’”
The professor, who served as a China adviser in the Obama administration, added, “For the past 20 years, China has benefited from both geoeconomic gravity and geopolitical momentum, but in the last year it has rapidly lost both.” Numbers are the bane of China’s attempt to reenter the international stage: the government announced last week that exports fell 9.9 per cent in December year over year. “China has an export slowdown, construction is in crisis, and the local governments are running out of money,” said Jean-Pierre Cabestan, professor of political science at Hong Kong Baptist University. “China needs the world: to boost its economy, to accompany the return to more normalcy.” The pandemic brought us many “new normals” that quickly disappeared once the world reopened; what will be the normal for China going forward?