For personal reasons Ireland is one of my touchstones when the world is changing, and more generally it is an interesting laboratory for looking at the effects of the rise and fall of globalization on a small open economy.
Globalization has changed Ireland in such a way that 20. of Irelandth The century continues to fade out of the collective memories of the Irish people. 20. in the middle ofth century, the country had some active trade and diplomatic relations, something that led author Sean ‘Faollen to remark that ‘Ireland … lies behind a green curtain that we have been rigged for the past thirty years – idea proof, world Proof, life proof’.
This is a commentary on a country that was waiting to be reunited with the world, but only recently came to mind when I thought of China.
In the past week, under heavy pressure from Chinese authorities, Didi Chuxing, the ride-hailing company announced that it would relaunch its NYSE Markets listing and instead list in China/Hong Kong. Also, this week the Women’s Tennis Association (WTA) has suspended its tennis tournament in China in response to the disappearance of player Peng Shuai.
He was ‘remembered’ in China after Zhang Gaoli formerly accused a high-ranking Chinese Communist Party official of sexual assault, and has since been believed to have been put under pressure. While the Epstein test shows that powerful men can behave just as awful anywhere, the behavior with Peng is appalling, deaf to international public opinion and repeated in the cases of other public figures.
As background I’ve begun to read the fascinating ‘Red Roulette’, Desmond Schum’s account of what happens to wealthy Chinese who grow up too quickly (the surprising Schum is referred to as the murders, ‘suicides’ and disappearances of many Chinese billionaires). To spoil the description of being).
Combine this with China’s opposition to almost all of its neighbors (some of whom even threaten it), other snippets such as the Chinese government’s decline in issuance of passports (despite COVID), the imperatives and moves of China’s COVID policy. An increasing range of attempts to establish self-reliance and in some cases international monopolies in areas such as data (LinkedIn has been cut to China) and rare earths, and a growing picture of a China that is consolidating its strategic autonomy, but is also cutting himself off from the rest of the world and adopting the terminology of ‘Faoláin’, wrapping himself in a ‘red curtain’.
This ‘Red Curtain’ process, if my view is correct, will be gradual but still worthwhile. David Skilling Points Outside That trade ties between the EU and China are still strong, and that US banks are more inclined to entrap themselves in the Chinese financial system (JPM’s Jamie Dimon is notable here, though less so for his diplomacy). However, Germany’s new government is less friendly to China than Merkel’s, and various EU-level monitoring procedures will prevent foreign (Chinese) investment in Europe.
In the bigger picture, the ‘Red Curtain’ is in line with the move away from internationalism by other countries or leaders (Brexit/Johnson, Trump, Bolsonaro), and confirms the trend towards multipolarity.
The size of China, the final stage of its very long business cycle (along with the slowing property market) means that the prospects of the ‘Red Curtain’ need to be taken seriously.
Diplomatically, this raises the problem that a more closed China is harder to read from the outside, and somewhat harder to deal with (ask Lithuania). At the domestic level, there is a risk that this more ‘closed’ approach creates a sense of risk aversion among entrepreneurs, a lack of debate about policy issues (especially at the local level) and, consequently, a policy blunder. A structural policy error may be that productivity slows down.
What is interesting from the investors point of view is that heavy-handed attitudes from Chinese regulators and politicians have turned Chinese equities (especially those listed overseas like Alibaba) into ‘value’ investments. Conversely if US companies that export to China (think Apple)
Especially on the other hand, more fund managers have told me that the Chinese government bond market tends to look attractive than in the West. In that context, Chinese assets – long regarded as a structural emerging market growth game – are becoming increasingly interesting to value investors.
Ultimately, whether this value is realized depends on one factor – Xi Jinping’s mind and ambition – by positioning himself as China’s leader for the foreseeable future, he has determined the fate of his country as an individual. What history tells us is a risky strategy, especially if it leaves China ‘idea proof, world proof, life proof’.