I predicted China's 2023. I was right about everything.
From post-pandemic confidence to international relations, it turns out predicting China’s next move isn’t that hard.
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Last January I decided to do something unusual and predict where I thought China was headed for the rest of the year. I don’t usually like doing predictions, as I think it detracts from meaningful analysis and realistically it doesn’t matter whether you’re right or wrong. I did it more as a fun little exercise. Now I’ve booted the newsletter back up, I thought it would be nice to revisit some pieces from last year.
Imagine my surprise when I reread the newsletter only to find out that I was right about everything! Either making predictions about China is incredibly easy, or I actually know what I’m doing. Can both things be true at once? I’m inclined to say no, mainly so you’ll stay subscribed.
So let’s hop in the time machine (we’ve got to go back to February 2023, Doc!) and review my predictions and exactly how they came true 🔮
Prediction 1: China tackles population problems head-on
My first prediction was that China “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.”
Almost immediately after I wrote that, local governments and political advisors started discussing and implementing a series of measures to boost birth rates.
Innovative ideas such as:
including university students in the national maternity scheme
creating a more flexible educational system so people can have children earlier
giving second and third children allowances
providing affordable housing for young people
making it illegal to fire pregnant women
providing maternity insurance to cover the costs of childbearing
Some advisors also argued that falling marriage rates and rising divorce rates need to be tackled first. The introduction of ‘cooling off periods’ and mediation for initiated divorces are proposed solutions. Another is banning large dowries that are impossible for the average man to afford, and encouraging young couples to live with their parents first before trying to buy a house in China's increasingly expensive housing market.
We’ve actually been talking about China’s demographic problems here since 2021, when the CCP came to its senses (at least publicly) and admitted that it really needed to do something about its lack of babies. As we all know by now, the problem of falling birth rates is a problem all over the developed world, but unlike *some* countries, China is actively trying to take steps to do something about the issue before it’s too late.
Despite CCP and local government efforts, couples in China are still not picking up the pace. It doesn’t help that it was recently announced that China is the second most expensive place in the world to raise children, second only to South Korea, the country with the lowest fertility rate in the world.
Mothers tend to suffer a loss in paid working hours and in leisure time as a result of raising children. Fathers only experience a loss in leisure time.
“Due to reasons such as the high cost of child-bearing and the difficulty for women to balance family and work, the Chinese people’s average fertility willingness … is almost the lowest in the world,” the researchers concluded. “Fertility willingness” refers to what people see as the ideal number of children, which in China is less than two, according to several surveys.
It doesn’t help that parents undergo a lot of stress when raising children. Seeing the difficulties young people face in today’s job market, perhaps they don’t want to put themselves through that stress just for their children to be even more stressed and hopeless. I think it’s safe to say that unless the CCP can tackle these fundamental issues, demography will remain an active crisis for the foreseeable future.
Prediction 2: China reopens the door to international investment
“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.”
Do I even need to say anything about this one? Seriously, if I was writing about the state of China’s economy today, I would write pretty much exactly the same thing.
In fact, I did that already in the last newsletter!
Red flags are going up all over China’s economy. Youth unemployment is up over 21%, with a glut of grads having to settle for dull local government roles or, worse, labouring in the fields. Last year in Henan, record unseasonal rainfall caused a fall in production and huge losses for farmers. Foreign direct investment has reached its lowest levels since the 1990s, dropping 82% in just one year.
The government has blamed everything from the global economic slowdown to covid (of all things), and says that China is still in the process of bouncing back…Against this backdrop of economic uncertainty, China has decided to embark on a diplomatic charm offensive aimed at strengthening ties with foreign partners and promoting international cooperation.
I don’t think that reaching out cap in hand to unnatural allies was China’s first choice for economic recovery, but at this point they don’t really have a choice. They can no longer rely on internal consumption as they had hoped… All this is to say that we can expect to see a lot more Chinese politicians wining-and-dining with top leaders from all over the world in the coming months, and possibly even years.
Damn, I’m good.
Prediction 3: Small friends, big ambitions
In keeping with previous years, I wrote 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.”
In the face of a shaky economy, China is certainly thinking more about its global trade, conscious of the fact that it cannot rely solely on domestic consumption to bring growth figures back up to expectations.
The Belt and Road Initiative (BRI), which turned 10 last year, has made China the world’s largest debt collector as total spending on BRI programmes surpasses $1 trillion. Most of this spending is done by smaller, economically less-developed countries that need cash injections, operational expertise, and materials to develop basic infrastructure. While some countries have buckled under the weight of this debt burden, the number of BRI projects is only increasing: “In the first half of 2023, over 100 BRI agreements were signed, valuing a total of $43 billion—a roughly 20% increase from the first half of 2022.”
However, China is still reliant on FDI from larger, developed countries to maintain its trade surplus. Poorer countries can’t afford electric vehicles (not yet at least), and are less interested in chip manufacturing as they are in roads and railways. While China still bites back when people come questioning its human rights record, it still can’t walk away from big spenders in the EU and North America, just like those countries can’t walk away from China.
Prediction 4: Young people will be sad
My next prediction was about the state of China’s youth and their career and life prospects.
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… 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…
China’s youth unemployment has reached new highs, with 21% of 16-24 year-olds out of work. There are a number of factors, from a slow economy to the lingering effects of covid, but the causes themselves don’t really matter. What matters is what the Chinese government is doing about unemployment, and how young people feel about their efforts. The government wants young people to try working for private firms (who have notoriously bad reputations when it comes to contracts and benefits) or strike out on their own. They’ve even offered to help young people get temp jobs in local counties - usually reserved for the elderly or disabled - and encouraged them to move to the countryside Cultural Revolution style to help revamp it with their city-smarts and go-getting attitudes.
Shockingly, young people are less than enthused by these prospects. As I noted last year, the Chinese youth are still on the edge of giving up, many of them returning home to act as ‘full-time children’, looking for jobs on Tinder, or selling their knowledge on the streets like some sort of Greek philosopher.
However, there have been some signs of life, with some young people striking out on their own, jumping off the beaten path and trying to take their future into their own hands. Young people suffering from burnout have tried their hands at influencing, van-life, or just drifting in search of meaning in their lives. They represent a lucky few however – most young Chinese people have neither the means nor motivation to try and beat their own track. The well-trodden path before them is already treacherous enough.
Prediction 5: Moving on from covid
My last prediction was that 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.”
Like in the West, the pandemic has been memory-holed except for situations where the government wants to pass the buck on a major issue, or provide a positive comparison. Covid is to blame for the poor state of the economy, lack of employment opportunities for young people, and lack of FDI. But when it comes to excess deaths, long-term health problems, the state of the health system, and the shocking displays of strict authoritarianism over the past 3 years, it’s all very hush hush.
Repeat performance?
But you could argue that most of these predictions were pretty tame. A lot of countries were worried about post-pandemic economic growth, and falling birth rates are a problem all over the developed world, not just East Asia. The real question is whether or not I’d be able to make similar (or better) predictions for China’s 2024.
There are a lot more variables to deal with now. As wars to the West worsen and tensions to the East deepen, it’s difficult to say which way China will go on any geopolitical issue, though a safe bet is usually to assume they’ll do whatever the opposite of the US does. When it comes to the economy, there are new problems as well as new opportunities, but their success or failure depends largely on external factors. The same goes for internal politics – the ability of the party to maintain its vice grip on potentially harmful information, dissent, and morale depends on whether any major events occur to throw them off course.
It could be a very boring year for China, or a very interesting one. How’s that for a prediction?