China: why Beijing pleaded for re-globalization in Davos

At the last World Economic Forum, which was held from January 16 to 20, Chinese Vice Premier Liu He, considered the true master of the country’s economy, met in Davos with a number of his ” Old friends”. He’s a regular. In a solemn speech, he recognized the importance of this type of meeting, lamented the fragmentation of the world and called for a “re-globalization”, while advocating “duality”.

The zero Covid policy, recently abandoned by Beijing, had cut the country off from the rest of the world, causing a fragmentation lamented by Liu He. This period of confinement was also an opportunity for China to experience a “duality”. Goods crossed borders, but not people.

Chinese exports then increased by nearly 30% in 2021 and by an additional 7% in 2022. Trade knows how to adapt to constraints. When Shanghai was paralyzed in April and May last year, much of the flow was reorganized through the nearby city of Ningbo, limiting disruption to supply chains.

Same refrain for inflation

Prices tell a similar story: In June, when the inflation rate in the United States peaked at 9.1%, the average price of Chinese imports in America rose only 3.3% compared to l ‘last year. With the abrupt abolition of the zero Covid policy, the flow of people has resumed. The number of passengers on Air China’s international routes has increased by a third… and Liu He was able to go to Davos to give a reassuring speech.

Re-globalization of China, de-globalization of its goods

He thus announced that real estate developers – threatened with bankruptcy – had received a “blood transfusion”, the government dispelling the specter of a general real estate crisis. Regarding China’s exports, the outlook is no longer bright. According to UBS experts, they will even fall by 4% over the whole of 2023. This would only be their fifth annual decline since 1980.

The re-globalization of the Chinese people will coincide with a de-globalization of their goods.

Yuan against dollar

In question, the sudden rise of the yuan against the dollar since the end of the Covid zero, making exports less competitive. The slowdown in the global economy will also reduce demand. And the landing will not necessarily be smooth. In December, for example, sales from China to America, the European Union and Japan fell 17% from a year earlier. Even if the slowdown is less pronounced than expected, the “mix” is becoming less favorable to China.

Read alsoGas, media: the Glucksmann commission warns of dependence on Russia and China

As a result of a decline in working from home, shipments of computers from China have also collapsed by a third. When the threat of lockdown loomed over supply chains, fears were raised that Chinese exporters could be a source of vulnerability for the global economy. Instead, the global economy is proving to be a source of vulnerability for Chinese exporters.