I hope you’ve had a good break over the holiday period and, assuming that you’re now back into work mode, I’m sure you’re ready for me to resume China Bites in 2021. I will be keeping at least one eye on China while the rest of the world is transfixed by the daily news and gossip from Washington as we brace ourselves for a new Presidency. You would be very brave to make predictions about how America will tackle the challenges and opportunities of 2021, but you can be a lot more certain about China.
Here is a short list of what we can expect from China this year:
- China’s GDP growth rate will be at least 8.2% in 2021. Bloomberg calculates that China will account for 26.8% of world economic growth (substantially more than America’s estimated 16%) suggesting that China’s economic power, relative to both the US, Europe and the rest of the world, will grow massively.
- China’s diplomatic and trade relationships with the rest of the world will improve for three important reasons:
- President Biden will need to quickly reset the US-China relationship so as to stimulate US trade and America’s post-Covid economic recovery. Expect him to back off from some of Trump’s more extreme anti-China rhetoric and get the diplomatic relationship back on track as soon as possible.
- European leaders will be keen to build on the opportunities arising from the Euro-China “Comprehensive Agreement on Investment” which was hailed as “the most ambitious agreement that China has ever concluded with a third country” having been signed off in principle on 30th December 2020. The timing of this announcement suggests that Europe is running its own race with China, independent of the US, and will protect its own interests by forging closer trade, investment and diplomatic ties with China.
- Middle western powers (eg UK post Brexit, Australia, Canada and others) will need to urgently reset their diplomatic relationship with China to compete with the US and Europe in key areas (e.g. agriculture, technology, food, wine, education, tourism and some commodities) to avoid being squeezed out altogether.
- China will become recognised as the leading e-commerce market in the world. The Economist ended last year by saying “the future of e-commerce is being staked out in China. Its market is far bigger and more creative than those in the West, with tech firms blending e-commerce, social media and razzmatazz to become online-shopping emporia for 850m digital consumers. And China is also at the frontier of regulation. The crackdown on Alibaba may be partly about settling scores, but it also looks likely to promote competition. For a century the world’s consumer businesses have looked to America to spot new trends, from scannable barcodes on Wrigley’s gum in the 1970s to keeping up with the Kardashians’ consumption habits in the 2010s. Now they should be looking to the East.”
Expect me to expand on some of these themes, and others, in the days and weeks ahead.