China's new normal: what to expect in 2023

As the lockdown portion of covid comes to an end in China, what does the party-state have planned for the country? And do the people have other ideas?

Happy New Year for whatever calendar you observe! It’s officially 2023/Year of the Rabbit all around the world and a new year brings new tidings and fresh predictions for everyone’s favourite superpower.

Even though I want to continue the trend of writing about China from the perspective of their own headlines, I thought it would be fun to start the year off by looking at where China stands and making some predictions for their 2023. That way, we can see how wrong I and all the other China-watchers on Twitter are come December. Fun!

I don’t usually like looking into the China crystal ball, mainly because most people are hogging it to prophesy the collapse of the nation (any day now!) instead of churning out any meaningful commentary. But it seems people have momentarily been distracted by Christmas and the horrors wrought by their own governments in their own countries. But we’re well into the new year now, so it's time to fire up those armchair-analysis-engines once again.

China has finally caught up to the rest of us, having decided that living with the virus, if not necessarily preferable, is the only way to ensure the entire fabric of society doesn’t unravel. What does this mean for the economy, society, and international relations? Will China manage to claw back its international prestige after being locked down for almost 3 years, or is it doomed to flounder in obscurity until eventual collapse? Let’s take a look at what we know so far.

A shrinking problem

We should probably start with the biggest story so far: China’s population is shrinking. We all knew the population was aging, but the government recently announced that the population actually declined for the first time in over 60 years. We knew the government was aware of this problem, as they had started introducing incentives for couples to have two or even three children last year. With birth rates down 20% year on year, and Chinese people living longer lives, the lack of future workers means that China risks growing old before it can ever become truly rich.

Blame it on the one-child policy, soaring cost of living, bad maternity leave policies, lockdown isolation, or anything you like, but most people in China just feel it's either too stressful or difficult to raise more than one child. This isn’t an easy problem to solve, and affects most developed countries, but the problem seems especially acute in East Asia. Most Chinese analysts also believe that the new policies will change nothing, and that this is China’s new reality.

To me, this problem is key as it will have a knock-on effect on every other area of China’s politics. How to keep the economy growing when the number of homegrown workers is decreasing? How to keep a disaffected youth motivated when they see opportunities disappearing before their eyes? How to hold on to international prestige and military power when people can peek at your demographics and chuckle to themselves that in 30 years, you won’t even be on their radar anymore?

My prediction is that the CCP will spend most of this year (and the years to come) actively tackling the demographic issue, whether that be revising retirement policies, working on birth plans, or expanding their views on migration. I’m curious to see what national and local legislation will be introduced, and what rhetoric will be concocted in the coming months. Looking forward to some fun new slogans, “Produce more people to produce a strong nation and a bright future” or something.

Big plans for the economy

Coming out of hibernation means that China is ready to restart its economy and re-engage with the world. But this doesn’t necessarily mean that things are going to go smoothly. The government has plans to boost consumption by expanding the market for consumer financial products (i.e. making it easier to borrow money) and encouraging people to buy electric cars, eco-friendly home appliances, and promote home buying and renting. There are also some hopes that salaries may be increasing, but reports also warn that “companies have faced more uncertainties in their recruitment campaigns in the past few years due to the epidemic and economic downturns, so it's better for job-seekers to adjust their own expectations to salaries to help land jobs successfully.” Basically, don’t hold your breath on that one.

The government seems to be pinning its hopes somewhat on foreign investment, with top officials spreading the good word that China’s economy is back online and ready to grow to whoever will listen. At the World Economic Forum in Davos, people reported that vice-premier Liu He was trying to get everyone pumped up about a recovering Chinese economy. The State Council also sent a request to regional authorities asking them to support foreign investors in setting up research and development (R&D) centres in China, including funding for universities, scientific research institutes, and vocational schools.

 “They are reversing everything that has been done in the last three years.They will be business-friendly and [know] that the economy cannot be successful without the private sector.” - Davos Attendee

But China will have to work hard to regain investors' trust, both domestically and internationally. The property crisis continues unabated as China’s home prices fell for a 16th month in December. Evergrande, which has been blamed for contributing heavily to the crisis, is still discussing restructuring proposals with creditors, as the government scrambles to offer cheap loans to developers. It’s all a bit of a mess, which foreign investors have clearly picked up on as FDI dropped 33% in November, and 29% in December. It’s a bumpy road out of zero-covid valley.

My prediction is that China will spend its time wooing international companies in the hopes that they’ll invest in China and perhaps set up shop there, providing jobs and boosting employment rates and incomes. Again, the population problem rears its ugly head, as everyone now knows that China’s ageing population will be an economic drag. There’s not much point in investing in a country with no new workers coming in, so we can probably expect a productivity drop, which will likely be blamed on the effects of covid, or perhaps not mentioned domestically at all.

They still hate the US

To absolutely no one’s surprise, China continues to call out the US for picking on them, politicising issues that the CCP definitely didn’t spend the last 3 years politicising, and riling up western nations to perpetrate some sort of invasion(?) of China. 

They also dislike Japan, which isn’t anything new, but is taking on some new aspects. Of course, this is mainly Japan’s fault, as Japan recently (and erroneously) referred to China as its “biggest strategic challenge”, potentially provoking regional conflict. It’s clearly not enough that Sony has already been banned from Weibo for talking smack about Chinese martyrs, they’ve now decided to gang up on China with the US and Netherlands to restrict exports of semiconductor technology to China. Though without an outright ban on foreign investments in Chinese universities, international grant applications, and collaborations between scholars from different countries, I’m not sure how useful the last one will be. It may slow China down, but China’s determination to dominate the chip industry and become self-sufficient in chip supply may outpace any late-in-the-game trade policies.

But at least China is still maintaining friendships with neighbours in the South China Sea (not Taiwan, never Taiwan). Xi’s recent visit to the Philippines reportedly went very well, with positive messaging about trade, potential new BRI projects, as well as access to fishing rights:

“The Philippine president said during the meeting that the Philippines is willing to keep appropriately handling the maritime issues via friendly coordination with China, and will restart consultation with China on exploration and mining of oil and gas.” 

This may be a sign that China will be focusing on developing their relationships with smaller, more local allies who they can co-opt into BRI, while still paying lip service to global competitors. This would be on par with previous years, especially during the pandemic where China prioritised shipping out their own vaccine to neighbouring countries and allies, while shunning western-made vaccines.

I love that in the article on the Philippines, they still manage to slide in a dig at the US:

“The Philippines is an ally of the US, so it would be natural to see Washington attempt to pressure and exert influence on Manila to interrupt China-Philippines ties… The Philippines has learned from the past, and current leaders understand what their country can get from pragmatic and friendly cooperation with China, and what they would lose if they unwisely allow themselves to be used by Washington to contain China. Today, since the US has very limited strength and influence to offer concrete benefits to seduce regional countries to serve its hegemonic strategy, the chance of Washington interrupting the South China Sea issue is getting less and less, analysts said.”

Not at all foreboding. 

China’s youth may start finding new values

Are China’s post-lockdown Gen Z as optimistic as their paternalistic government about their futures? All indicators point to no.

Delays in important exams such as the postgraduate and civil service exams meant many felt uncertain about the future during lockdown. Then, as many students fell sick with covid when the exams did go ahead, they found themselves unable to perform to the best of their abilities, and many of them just gave up halfway. According to this Sixthtone article, in one university as many as ⅓ of students didn’t even attend the second day of testing. As one student noted “It was quite shocking to see such a big number of students giving up on their exams — it’s a big deal for us.” Truly, with the job market in chaos, wages deflated, and young people at a loose end, any opportunity to land a secure job is a dream come true for many, even if you are one of 2.5 million people vying for just 37,100 roles (imagine only having a 1 in 68,000 chance for getting a job at HMRC).

But some students may not just have quit because they were too sick to go on (although it was almost certainly a factor). For a few years now we’ve seen shifts in Chinese youths' attitudes towards gruelling testing, long working hours, and competitive dead-end lifestyles. Lying flat was a huge topic last year, so big in China that even the government had to step in to address things. The endless lockdowns and record high unemployment have only added to the sense of helplessness and loneliness that many young people feel. People may just have quit because they thought the whole thing - the system, the endless exams, the uncertainty - wasn’t worth it anymore.

But this is not to say that they are without ambition. Many young Chinese - those who have only grown up in a stable and prosperous China - are taking chances with their future, leaving traditional career paths to start their own businesses. It shows that Chinese youth are turning more inwards, relying on themselves instead of predetermined destinies their parents or the party may want them to pursue.

Returning to the Sixth Tone article, a quote by the student Yang Chengnuo really stands out:

“It doesn’t matter to me whether I succeed in the exams or not. It’s no longer as important to me as it was before. My life has been changed so much by the pandemic. I was in my senior year at university when it started. Now I’m about to finish my postgraduate studies, but I feel like things are only getting harder every year. I decided to move on with my life; I deserve more happiness.”

It truly reflects how young people are not only evaluating their own lives in the wake of the pandemic, but also what it means to be fulfilled and, ultimately, to be happy.

Life with covid

Of course, all of the above hinges on how well China will learn to ‘live with covid’ as the rest of us have. Earlier this month, the government reported 60,000 deaths since ending zero-covid, though unsurprisingly many are doubting the validity of those stats. China has no reason to be truthful with the rest of the world about covid deaths, and every reason to be deceptive. It may also be a case of lack of infrastructure to report on covid deaths, especially as the disease continues to ravage underdeveloped parts of the countryside with little access to modern medicine or care.

The knock-on effects of covid will probably continue to be downplayed by the government, who want to focus on recovery and instil a sense of optimism in the population and foreign watchers. Attracting investment and deterring encroachments are top priorities for this year. Whether or not they’ll become reality depends on how much the government can retain its grip on Chinese society and continue to dictate their futures in a post-lockdown world.

Do you have any grand predictions for China’s 2023? I’d love to hear about them in the comments!

Don’t forget to share this newsletter with your friends, family, colleagues, pets, and anyone you come across in the street, especially if they happen to be reading a copy of the Economist. And don’t forget you can always suggest topics for future newsletter, don’t be shy!

If you haven’t had a listen already, check out my appearance on the 10k posts podcasts, where we spoke about covid and lockdown in China, and the realities of social media shadowbanning and Wechat group narcs.