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Accuracy Talks Straight #3 – One Partner, One View


Frédéric Recordon
Partner, Accuracy


At first glance, everything seems to be going well in China. The country has overcome the COVID-19 pandemic, its economy has regained momentum, and it seems to be entering a new era of prosperity, one that European businesses present in the country should be able use to good advantage.

However, upon reading the 14th Five-Year Plan (2021–2025), troubling signs of the country starting to turn in on itself are becoming evident, allowing considerable doubt to linger over the country’s future growth trajectory.

After 40 years of modernisation, economic reform and opening up to the world, the Chinese economy has reached c. USD 10k in GDP per capita, a level similar to that of Japan and South Korea after equivalent 40-year periods of economic growth in these countries in the past. However, for the last five years, Chinese growth has been significantly running out of steam, and this trend may well continue if the country chooses insulation over the openness practised since Deng Xiaoping.

The Dual Circulation policy, the core of the 14th Plan, seems to prioritise the autonomy of the domestic market (internal circulation) over openness to foreign trade and investment (external circulation), despite the reassuring words of President Xi during the opening of the China International Import Expo in Shanghai on 4 November 2020.

The fact that several sectors key to Chinese development, such as the internet, energy and education sectors, have recently been taken in hand and that a growing role is being attributed to public companies – despite their low efficiency and productivity – to the detriment of a highly dynamic private sector are testament to the thinking behind such strict economic control. They also demonstrate a major turning point in the recent economic history of the country. President Xi clearly owned this turning point when he stated: “the invisible hand [market forces] and the visible hand [government intervention] must be used correctly. (…) In China, the firm direction of the Party constitutes the fundamental guarantee”.2

The European Chamber of Commerce in China in its 2021/2022 Position Paper dated 23 September 2021 expressed its concern about an insular withdrawal and urged the Chinese government to continue its work of reform and opening up to foreign companies.

The months to come will give an indication of China’s future trajectory. We can hazard that the country will be governed like a small fish is cooked, something President Xi likened to walking carefully across a thin sheet of ice.3


1 President Xi Jinping quoting the Book of the Way and its Virtue (Dao De Jing, , 道德经), The Governance of China, p.493

2 President Xi Jinping, speech during the 15th session of the Political Bureau of the XVIII Central Committee of the Communist Party, The Governance of China, p.137

3 President Xi Jinping, interview with BRICS correspondents, 19 March 2013

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