Plus: The Japanese word of the year
Hi Intriguer. One way to think about geopolitics is in terms of signals: reading and mis-reading them; guessing and double-guessing them; with your neighbours, allies, adversaries, and the market.
The US Federal Reserve sent some intriguing signals to the world yesterday, acknowledging for the first time that it’s making progress in tackling inflation. Markets loved that signal, and rallied.
But our briefing today leads with some decidedly more mixed signals sent from a key economic meeting in Beijing earlier this week. The market response to these signals seems to have been more of a ‘meh’.
– Jeremy Dicker, Managing Editor
An EU sweetener. The European Commission has unblocked €10.2B in frozen funds destined for Hungary, just before today’s EU-wide talks on the future of Ukraine. The gesture looks like a sweetener for Prime Minister Viktor Orbán, who has vowed to oppose both EU accession talks and new EU aid for Ukraine.
Spillover. The ongoing conflict in Gaza could cost nearby Lebanon, Egypt and Jordan 2.3% of their collective GDP, and risks pushing more than 230,000 people there into poverty, according to a UN study. The figure could double if hostilities last another six months.
Impeachment. The US House has voted to authorise its impeachment inquiry into President Biden for alleged corruption during his tenure as vice president. President Biden says the vote was a “baseless political stunt”.
The chancellor’s new budget. Germany’s coalition government led by Chancellor Olaf Scholz has finally agreed to a new budget for 2024, after weeks of turmoil sparked by a court ruling. The new spending bill will cut €12B from the country’s climate and transformation fund to avoid going over a constitutional debt limit.
TOP STORY
Chinese President Xi Jinping addresses this year’s Central Economic Work Conference. Credits: Xinhua.
Analysts unimpressed by China’s 2024 economic agenda
The Chinese Communist Party (CCP) wrapped up the two-day Central Economic Work Conference (CEWC) on Tuesday.
‘Central’. ‘Economic’. ‘Work’. ‘Conference’.
It’s hard to think of four duller words, and having been in the audience for a CCP work conference previously ourselves, we can confirm they are indeed extremely dull events. But this meeting is consequential, and here’s why.
The CEWC is an annual meeting of top officials chaired by China’s president to take stock of the past year and set the economic agenda for the year ahead. But this year’s CEWC wasn’t like the dozens before it.
First, it came at a bleak time. China continues to grapple with record-breaking challenges across real estate, youth unemployment, local government debt, and beyond, with implications for the world at large.
Second, an earlier high-profile economic meeting, the Third Plenum, was unexpectedly and inexplicably delayed in recent weeks, adding to a sense of uncertainty around President Xi’s forward plans (a new date is still TBC).
And so third, with the world eagerly watching this week’s CEWC for insights into President Xi’s thinking, we were instead surprised to see him ditch the second half of the conference for a state visit to Vietnam.
What did Xi and his team end up saying about their plans for 2024?
According to the official readout (🇨🇳), they listed nine priorities:
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At the top (up a place from last year) is “[creating] a modern industrial system […] focusing on disruptive and cutting-edge technologies”. This really looks like a response to US efforts to limit China’s access to key tech.
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In second place (it was first last year), we have “expanding domestic demand”, which comes after recent economic data suggesting both consumer and business confidence are hovering near five-year lows.
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Taking the bronze, there’s “deepening reforms in key areas”, listing a bunch of items that seem pitched both at locals (“taxation system reform”) and foreigners (“rights protection”).
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And in fourth, there’s “opening up to the outside world“, which implicitly accepts that international sentiment towards China has turned. It calls for everything from an “Invest in China” brand to the removal of hurdles for foreigners to “come to China for business, study, and tourism”.
The other five focus on addressing risks (like in real estate), plus progressing various bits of work across rural, urban, environmental, and livelihood issues.
Overall, the document strikes a tone of methodical confidence. It sums up China’s economic position by noting that “favourable conditions outweigh unfavourable factors”.
INTRIGUE’S TAKE
So, what should we make of all this?
First, anyone hoping for a clear change in direction to address China’s challenges will probably be disappointed. Xi’s list seeks to stabilise the economy, more than stimulate it. And there’s no indication he plans to ease any of the recent national security moves that have spooked foreign investors.
Then, second, what does that mean for China’s economy in 2024? Given Xi is staking his legitimacy and legacy on restoring Chinese greatness, a Western ambassador to Beijing recently described China’s economic outlook to us like this: “one way or another, Xi will find a way to keep muddling through”.
That’s reflected in tepid market expectations for ~4.5% growth next year.
Also worth noting:
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Markets didn’t love this week’s CEWC, with a key local stock index seemingly shrugging in response.
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MEANWHILE, ELSEWHERE…
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🇦🇲 Armenia: Azerbaijan and Armenia swapped prisoners-of-war at their border yesterday (Wednesday), stabilising ties after Azerbaijan seized an ethnic Armenian enclave in September. There are reports they’re also discussing the withdrawal of troops from their shared border.
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🇩🇪 Germany: Prosecutors have formally charged 27 people (including a self-styled prince) in connection with last year’s alleged plot to topple the government in Berlin. Authorities say the group tried to contact Russian officials in 2022 to win Moscow’s support for the plan.
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🇮🇳 India: In a major breach, a man has jumped from the visitors' gallery into India’s parliament, setting off a smoke-can while shouting unknown slogans. The incident took place in India’s new, high-security parliament, which Prime Minister Modi inaugurated in May.
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🇻🇨 St Vincent: The leaders of Guyana and Venezuela are due to meet at an airport on the island of St Vincent today, as regional players push the two to defuse a long-standing territorial dispute. The prime ministers of Barbados, Dominica, and Trinidad & Tobago will also attend.
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🇨🇩 DRC: A US-brokered ceasefire between the M23 rebel group and DRC troops kicked in on Tuesday ahead of elections due next week. M23 has welcomed the de-escalation in a conflict that’s displaced at least a million people this year.
EXTRA INTRIGUE
Here’s what the world googled yesterday
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🇻🇳 Film fans in Vietnam looked for ‘Chau Hai My’, the famed Hong Kong actor and singer who died of illness in Beijing this week, aged 57.
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🇳🇴 Norwegians googled ‘VM håndball kvinner’ (Women's Handball World Cup), as their team faces off against either Denmark or Montenegro in the semi-finals tomorrow.
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🇸🇦 And folks in Saudi Arabia searched for ‘معرض جدة الدولي للكتاب’ (Jeddah International Book Fair), which wraps up this weekend and features a French pavilion for the first time.
PHOTO OF THE DAY
A Kyoto-based organisation that promotes the use of kanji (certain Chinese characters used in Japanese) has announced that the character for ‘tax’ is the 2023 kanji of the year. The kanji for ‘hot’ and ‘war’ came in second and third, summing up what’s been a rough year for folks around the globe.
DAILY POLL
Do you think foreign policy should be taught in high schools? |
Yesterday’s poll: Do you think COP28 was a success?
🟨🟨⬜️⬜️⬜️⬜️ 👍 Yes, as successful as it could have been (23%)
🟨⬜️⬜️⬜️⬜️⬜️ 👎 No, the delegates didn’t go far enough (18%)
🟩🟩🟩🟩🟩🟩 😐 Are these conferences ever successful? (55%)
⬜️⬜️⬜️⬜️⬜️⬜️ ✍️ Other (write in!) (4%)
Your two cents:
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👍 S.N: “We're talking and we're at least "looking" in the same direction. Now we just have to identify the point on the horizon and get there. ‘How fast?’ will be determined by individual parties and conviction toward leading change.”
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👎 D.C.W: “A ‘feel good’ agreement. If it’s in some countries’ best interests to not follow the agreement, they won’t.”
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✍️ M.D: “Renewable energy sources are not reliable enough to warrant a phase out of fossil fuels. Natural disasters and man-made disasters can too easily cripple renewable sources. We cannot phase out fossil fuels without a much more robust renewable infrastructure.”