BEIJING: China’s meagre 3% growth for 2022 signals the end of a three-decade-long golden age for the country’s economy.
With the exception of 2.2% growth for 2020, at the height of the Covid-19 pandemic, it is China’s worst economic performance since 1976, when the Cultural Revolution dragged growth into negative territory.
The abrupt abandonment of the zero-Covid policy – and the explosion of cases that followed – is not the sole reason for the lacklustre growth. Economic policies championed by President and Chinese Communist Party General Secretary Xi Jinping were another factor. For the past decade under Xi’s rule, philosophy has come before economic rationality.
An incident that happened last week was symbolic.
On Jan 10, a convoy of cars belonging to the municipal government of Hangzhou, Zhejiang province, entered the campus of the Alibaba Group, the e-commerce giant co-founded by Jack Ma.
Among those stepping out of the cars was Liu Jie, the Hangzhou party secretary. That day, the Hangzhou government and Alibaba agreed to restart their long-shelved strategic partnership.
About three weeks earlier, Yi Lianhong, the newly appointed party secretary of Zhejiang province, had also visited Alibaba. He had returned from a trip to Beijing, where he attended the Central Economic Work Conference of the Communist Party, a meeting that discussed China’s economic policies for 2023.
Immediately upon his return, he headed to Alibaba’s headquarters.
At first glance, the visits seem to signal a warming of relations between the government and Alibaba, a shift from the tech clampdown and a desire by the central leadership to work with the platform to revitalise China’s ailing economy.
“This is a complete misreading of the situation,” a Chinese source familiar with business affairs in Zhejiang said.
The context of the visits becomes clearer when taken together with another development. On Jan 7, Alibaba-affiliated financial company Ant Group announced that Jack Ma, its founder, would give up control of the company.
The restructuring left Ma with a little more than 6% of Ant’s voting rights; he had previously held more than 50%.
It can perhaps be compared to the bloodless fall of Edo Castle in Japan. The 1868 incident ended the rule of the Tokugawa shogunate, returned power to the imperial family and ushered in the Meiji era. Edo was renamed Tokyo.
Now Ma has surrendered Alibaba Castle without putting up resistance. He has been staying in Japan since before the Chinese Communist Party’s national congress last October, unable to return to China.
Hangzhou Secretary Liu Jie’s visit came three days later.
Sitting on top of the data of more than 1 billion users of Alipay, China’s ubiquitous mobile payments platform, Ant wields enormous influence. Ma was instrumental in bringing Alipay around the world.
Ant did not have any major management problems. Instead, it was precisely its success, and the influence that accompanied that success, that came under increased scrutiny from the Xi regime. Ma was eventually deprived of his control of the company.
Around the same time as Ant’s announcement on Jan 7, photos of Ma taken in Bangkok surfaced on social media. Since moving to Japan, Ma has occasionally travelled overseas. Each time, he has returned to Japan, not to China, keeping a low profile.
Following Ma’s loss of control of Ant, an investment company affiliated with the Hangzhou government became a major shareholder.
Suddenly, Ant became a company under the direct influence of the party and the Chinese government through voting rights. This influence over Alibaba will strengthen and the fact that the Hangzhou government and Alibaba have become strategic partners is significant. Deprived of their leeway, Alibaba and Ant will face an extremely high hurdle to rapid growth.
It was on Nov 2, 2020, that a masterpiece by Kaii Higashiyama, Japan’s most celebrated contemporary artist, was used to imply the perilous situation Ma now finds himself in.
State-run Xinhua News Agency’s WeChat account published a column accompanied by a landscape painting by Higashiyama featuring a horse-shaped white cloud in a blue sky.
Jack Ma was born as Ma Yun, which literally means “horse” and “cloud”.
The Xinhua column, in effect, warned that the horse-shaped cloud in the painting was doomed to disappear after being swept away by a blast of wind.
Its publication came after Ma was summoned by Chinese authorities for questioning. A day after the controversial painting was posted, the postponement of Ant’s initial public offering was announced.
Ma probably saw the article as a prank played by Xi to flex his muscle or as a form of bullying at the hands of the party and state. Now, two years and a few months on, it is clear that the printing of Higashiyama’s painting was no joke. It was a statement of intention.
That the dismantling of the Alibaba empire came right after the death of former Chinese president Jiang Zemin in November is too much of a coincidence.
Ma founded Alibaba in Zhejiang province in 1999 when Jiang was China’s top leader. The following year, Jiang announced a policy of allowing private-sector entrepreneurs to join the party, which had previously been regarded as the domain of workers and farmers.
But with Jiang’s innovative Three Represents ideology incorporating private-sector entrepreneurs into the party, big-idea executives gained freedom and expanded their sphere of activity. Ma was the poster child.
The Chinese economy had remained stuck in the doldrums after the deadly Tiananmen Square crackdown on pro-democracy student demonstrators on June 4, 1989.
In the wake of paramount leader Deng Xiaoping’s “southern tour” in early 1992, China changed direction, back toward “reform and opening-up”. With its accession to the World Trade Organization at the end of 2001, during the Jiang era, China’s economy began to fly.
The driving force was private-sector entrepreneurs, including Ma. State-owned companies – to which the Xi regime attaches importance – played only a supporting role.
But under the policies of Xi, the final curtain is falling on an era when people at major private companies walk with their heads held high.
China’s market-economy governance seems to have retreated to the days before the Jiang era and turned its back on a golden age brought on by nearly three decades of liberalisation.
Even before the 1989 Tiananmen Square crackdown, Chinese authorities did not restrict the freedom of fledgling individual business operators or seize their legally acquired personal assets.
What happened with Ant – which unfolded outside the framework of legal measures – is a clear break from the path China has pursued since the reform and opening-up policy was introduced at the end of the 1970s.
While the radical buzz phrase, “the prevention of the disorderly expansion of capital”, is no longer uttered as often as it once was, the fundamental way of thinking remaining unchanged with Xi at the helm.
China’s economy now faces another headwind, a declining population. The National Bureau of Statistics on Tuesday announced the country’s first population decline in 61 years. If the trend continues, it will become a major factor putting downward pressure on the economy.
After the death of Jiang, the party and government held a large-scale memorial for the deceased former leader at Beijing’s Great Hall of the People on Dec 6.
When Jiang’s body arrived in the capital from Shanghai, Jiang’s power base and China’s commercial hub, a farewell song was played. It seemed to sound the death knell for the era of economic freedom long enjoyed in the country.