An international eye on WEF in 2024 via NuseReal

WEF New Champions: China's economic outlook

The Annual Meeting of WEF New Champions, held in Dalian, China, took place on 25-27 June 2024. It brings together more than 1,600 global leaders, from the public and private sectors, as well as civil society and international organizations. It included an address by Premier Li Qiang (LINK)

On the closing day the Meeting held a panel discussion on China's economic outlook: video of session (LINK)

Headwinds facing China

Moderator Tian Wei opened by speaking of "headwinds" facing China in achieving its announced growth target of around 5%.

China's recovering growth "good news for the world"

Peng Sen, President of the China Society for Economic Reform [around 5min:20secs in video], noted (here always using his translator's words) that China "got back onto a growth track in 2023", achieving 5.2% growth and contributed about 30% to global economic growth. In the first quarter of 2024 achieved better than expectations with a 5.3% yearly equivalent increase. In April and May investment and consumption "tailed off" somewhat. But "exports and international trade generally have enjoyed quite a large boost." As a result, in May it was up 8.6%.

Peng warned though that "the process of recovery doesn't yet have very firm foundations. Overall demand in the Chinese economy is still insufficient. Expectations among the public are somewhat weak." Internationally China faces uncertainty. But moves towards "new quality productivity" and the new plenum of the Party next month is expected to bring "more good news".

"As China's growth stabilizes this is good news for the world," he added.

China's greener economy is leading international collaboration for others

Tian Wei then turned the panel towards questions about China's hopes for greening its economy.

Jin Keyu, Professor at the London School of Economics [9:25], pointed out that China's early lead in electric vehicles and solar panels was part of a global supply chain and had "pulled up the economic development of many neighbouring developing countries".

"It is going to be the same [...] with renewables actually involving more advanced economies," she argued. "China is investing heavily in Europe directly: setting up plants and batteries and EV platforms -whether it's Poland or Spain, setting up join ventures with EV, taking advantage of China's technology. The table has completely flipped." She also emphasized: "This is a collaboration."

Prof Jin reminded the participants that 45 million EV vehicles will be needed by 2040 "to keep us on track of the green transition".

Relations with the U.S.

Inevitably U.S. relations was a topic: Professor Eswar Prasad of Cornell University [11:50], declared that "a new baseline" has been set in U.S.-China relations in the past year that "could lead to more hostilities, more tensions". Whatever the U.S. November election results, "my sense is that we are not going to have a major change in the overall approach of the U.S towards China but the tactics, the strategy, could be very different under a Trump administration."

The main change has been that their trade and finance relation "is now seen as a zero or even negative -sum game." One reason is that industries China is pushing are those that U.S. and European industries are counting on for their revival.

Fortune 500 leaders bullish on China

Tian Wei then asked whether we could view developments from any other perspective than geopolitics.

Aparna Bharadwaj of the Boston Consulting Group in Singapore [15:50], observed first that China's promised 5% growth "will add more to the global GDP than India, Indonesia and Japan combined". Among Fortune 500 business leaders, more than half surveyed by the Group were bullish on China.

High quality growth

Tian Wei then put the emphasis on "high-quality growth", a buzzword in China, she suggested. What is the role of government here?

Peng [22:45] replied that a new phase of China's reform was needed because its policy now dates back 45 years. In the last Party plenum it was decided to "give full play to the role of the market". Government would create a level playing field. "We have 180 million businesses in China. SMEs have an important role to play."

Questioned by Tian Wei, he added that "the foreign also contribute in a significant manner to the Chinese economy. We should continue to reduce the restrictions that have been in the past [...] for example, in health care, and this is what we have been doing".

Government's role not financial intervention

Prof. Prasad [26:45] said restrictions in the tech sector, educations and health sectors in 2022 and 2023 made some Chinese fear the government was not as encouraging to business as in the past. The government's role is to "create a market-based financial system that does a good job of allocating credit". Effective regulation and the right incentives ensure that free financial does the right thing, he insisted.

Support framework

In promoting innovation, the government's job is to make private enterprises feel they are encouraged and get the credit needed but also a better supporting framework in terms of corporate governance standards, auditing and accounting frameworks, Prof. Prasad observed. "I think the big issue is for the government to provide a very clear policy framework, which I hope we will see in the third plenum, which not only sets out what the government's objectives are (and I think we know those already) but to really think about the part that the government has in mind in order to get the economy to that place."

Industrial policy must encourage competition to succeed

Prof. Jin [30:00] remarked that we are currently seeing an increasingly strong state, and the reason she saw was in China's success in the new emerging sectors, leading to a return to industrial policy, which had been the specialty of industrial nations., e.g. in Green Industrial Strategies. "Soft" development in training etc is important. But the key question is, she told the session, is whether industrial policy ultimately encourages competition. Then it could have a very positive impact.

Asia accepts AI products

Ms Bharadwaj [31:00] proposed that Chinese businesses could prosper with AI products in other parts of the world. The Group found in Asia that consumers are much more accepting of AI-based solutions than in, say, Europe or Australia.

Where now?

Prof. Jin [34:45] said that "the next chapter" would be Chinese companies going global. Decades ago this was the mantra for Chinese traditional industries. Today, the newer industries are making their bid for global markets. Already, four of the five most downloaded apps today are Chinese. Innovative business models, the digital economy (accounting for 40% of the Chinese economy as distinct from 10% in the U.S), data and computing -products can be tailor-made, implemented very fast, and cost-effective: so particularly attractive for developing countries. "But of course there are still lots of cultural barriers."

The biggest problem: deglobalization

Peng Sen [38:00] said the Russia-Ukraine war, Israel-Gaza fighting, and Middle East disputes with the impact on oil and food supplies are not the main obstacles to China's growth. "The big problem is the trend of deglobalization. There's a new wave of unilateralism and protectionism." The U.S. has imposed 100% duty on Chinese EVs. Semi-conductors tariffs are up to 50%, raw materials 25%. The European Union threatens to impose 20-30% tariffs on Chinese EVs.

'China doesn't want to see a trade war but is not afraid of one'

Peng [40:30] spoke in favour of negotiations under the World Trade Organization to settle the disputes but added: "China doesn't want to see a trade war but is not afraid of one."

In fact, though U.S. imports from China had declined, the total of Chinese goods had not changed because of Chinese production elsewhere in the Americas, South-East Asia, and so on.

"The U.S. has ostensibly been looking to protect its industries and consumers but it has actually been damaging the world value chain and has also been increasing costs, which ultimately are born by the U.S. consumer."

China must show it takes trade rules seriously

Prof. Prasad [43:45] proposed that China had tried to maintain a rules-based system but still needed to convince others it takes it seriously in terms of giving American and other Western companies more broadly access to its markets.

Prof. Jin [45:00] pointed out: "China is in transition," and many investments do not pay off except over a long period. "Be realistic about what all this means."

Effects of a Trump administration

Given the opportunity to ask questions, the audience wanted to know what the impact of a Trump election might be, and future policy of the EU towards China.

Prof. Prasad [48:30] suggested the objectives of a Trump administration with regard to China "are probably not going to be that different, but [...] the tactics might be quite different. You might have much more histrionics. You might have tariffs rather than the sort of measures the Biden administation has taken. There is an important question of what role Europe will play in this. The Biden administration has been much more effective at gathering together like-minded countries from the West. With a Trump administration I think we are likely to see much more fragmentation. He will not care that much about Europe."

China might then try to develop better relations with Europe. "But Europe feels as threatened as the U.S. right now, because many of its ambitions of moving up to higher tech industries and new technologies are also seen as being threatened by China."

Prof. Jin [50:00] recalled a previous U.S.-China panel's observation at this Forum: "Neither president is good for China but neither Presidential candidate is good for the U.S. either." But she warned that action against China could lead to a reduction in potential GDP growth globally.

Peng [52:00] spoke of the importance of the upcoming plenum of the Party. "We have a lot of challenges. We want to have more openness and a more market-oriented economy. We want the market to play a bigger role. We have to give them better policies to grow. We also have a big internal market and do away with restrictions on the local local. There should also be reform about land, about technology, about labour, about data as a factor of production, give full play to the market to decide in terms of pricing. Ultimately our reforms will also improve mechanisms, for instance, in terms of intellectual property, competition."

Takeaways

Moderator Tian Wei [54:00] then asked the panellists to sum up briefly the takeaways from the session.

Peng said: "I think as far as the Chinese economy, there's a lot of hope." Prof. Jen: "Make sure we keep China open for business, and make sure we keep the world open for China." Prof. Prasad: "Decent short-term prospects. And as for the longer term: good prospects if the government does the right thing." Ms Bharadwaj: "All business leaders, no matter what industry, no matter what specialization, need to develop a geopolitical muscle to be able to thrive in [our] more complicated world."

China's Third Plenum will jolt the economy, again — Reuters ● — 30 June 2024 (LINK)

China's Communist Party to hold key third plenum on July 15-18, state media say — Reuters ● — 24 June 2024 (LINK)

WEF's Spencer Feingold issued a summary of key points from the China speeches at the Meeting — (LINK)

Selections

• Chinese Premier Li Qiang: "China's large market is open. The rapid growth of new industries and new drivers has buttressed the sound and sustained development of the Chinese economy."
• Following the government's open and reform economic policies in the 1970s and 1980s, China's rate of economic growth has been unparalleled. Economic output per person, for instance, has increased by roughly 3,000% in recent decades, leading many analysts to refer to China's economic growth as a "miracle."
• Peng: "We need high-quality growth in order to stimulate our development and our growth. This depends on the transition, the revolutionary transformation, on the technological front, and as for the traditional sectors, they need upgrade and they need a deep transformation."
• Jin: noted that "trillions of dollars of investment is needed" for the global green transition, adding that "China is going to play a very essential role" in the transformation.
• Industries associated with high-quality growth include sectors like generative AI systems, semiconductors and renewables energies, experts say. Maintaining efficient supply chains and access to global markets is essential to high-quality growth, too. "The really important point to note is that this is all part of a global supply chain," Jin added. "China might be leading the way in EVs, batteries and solar panels, but they are all embedded in a global supply chain. And it's going to involve everybody."

Earlier Global Geneva Insights about WEF

Isn't it ironic? Untangling the paradoxes of WEF at Davos — 23 January 2023 (LINK)

Klaus Schwab: Geneva's unlikeliest revolutionary — 21 January 2020 (LINK)

International Geneva: Already a leader in the next Industrial Revolution — 20 March 2017 (LINK)

Global Geneva Eye on the World Economic Forum