China is now in fashion in the global circuit. The Davos Man, as the elite and the glitterati of the world are referred to, is only chattering about China and what is happening there. Under Xi Jinping China had suddenly burst upon the world like never before. Since assuming the supreme leader’s role, Xi has taken the country out of the former shell and now wants to make the world dance to its tunes. It has inevitably brought on clashes with the United States and this is the topic of conversation at Davos.
The World Economic Forum’s annual meet in the Swiss village in the Alps has become an extended committee for managing the world economy. In the five days of confabulations among the world’s rich and powerful the fate of the world economy is as if decided over formal panel discussions, informal chats, official and unofficial dinners and lunches. If one single person is dominating the show at Davos this year, it is Chinese vice president Wang Qishan. Wang has been the close confidant of Xi Jinping and supported him on his anti-corruption drive.
At Davos, he made the main Chinese presentation, which has been most minutely interpreted by the congregated economic and political leaders. In the absence of Donald Trump, who cancelled his trip, Wang’s observations would give the clue to the inner workings of the US-China spat. , But for his speech, Wang did not mention the US president even once, though his entire presentation was a refutation of the US position and putting forth the alternative version.
In one such dinner meet, as reported by Bloomberg, hosted by one of China’s most powerful government economic managers, CEOs of the cream of Chinese companies and another set of some 20 of world’s biggest corporates had a brainstorming session on current realities of Chinese economic policies. Many of the international corporations had reportedly complained of policy shortfalls and consequential distresses. It is unheard of that such grievances could be aired in meetings with government higher-ups if the meeting was being held on the mainland.
But then, there were other points of view as well. In an open interview, the chairman of PIMCO, one of the largest investment funds, dispelled all fears about Chinese economy getting into a slump. It was stated that China was one of the best-run countries in the world and each one of its leaders and high officials had invariably gone through rigorous training and exposure. Their experience would be rich enough and that collective wisdom could guide the country to desired destinations.
One can some time detect the underlying objectives of interlocutors at different kinds of interactions. Corporates have to do business and China is a massive market which few can eschew. Open fora can be useful for solicitations. At the same time, the players need to air their pains when arms are twisted on the ground. Three distinct notes are discernible in the babble. First is the ramifications of US-China tussle; the second, is the fear of China slowing down drastically and thereafter its consequences; thirdly, the chances of a striking a deal. The so-called Davos Man is deliberating on all three of these this year.
China had been growing at a fast clip, sometimes at 9% to 10%, a year for many years. With its size of economy, China cannot any longer grow at that rate. The country has to slow down to remain stable. The economic managers of the country were acting feverishly to bring out such an outcome. This is the process of soft landing for the economy as opposed to a collapse or crisis, what is commonly called a hard landing.
Now that China is slowing down, concerns have mounted whether the slow-down is a managed process or the slackening of the pace could gather its own momentum and result in a sort of crash. Because this is a classical conundrum: you either grow or else collapse. The Chinese managers have to prove that the western binary options could be avoided and still can manage a softer landing with gradually slowing growth rates.
No doubt that the trade tiff is already starting to bite the Chinese economy hard. Being export-oriented, it is no easy task to reset to a model of domestic consumption-based economy. In fact, this year the Chinese are buying far fewer automobiles and this itself is giving a jolt. The government is pushing incentives and concessions to cajole the Chinese to buy more cars. But that is not easy.
Other kinds of fiscal stimulus are also being introduced, but some of these can, in fact, backfire. On earlier occasions, faced with slowdown, the Chinese economic managers would kick in a process of massive infrastructure building, which could create demand for sectors like steel or cement. But that also has its limits. Infrastructure facilities are so extensive that you have really to invent where to build fresh ones. It is being said that this time around, Chinese are again expending their railway network.
Given the weak economic data and increasing pressure that the dispute is bringing on China, is it likely that a quick resolution might be on way. At least, doing by the rhetoric of the Chinese leadership at Davos, the indications are to the contrary. They are faring their views on not cowing down any more before neo-imperialist forces. But then, you never know. Behind the closed doors any concessions might be in order if that means a prop for the supreme leaders. After all, Xi is playing out over a very long period, the democratic countries have only limited playtime.
Anjay Roy is a freelance journalist. Views are personal.
