As the 100th anniversary of its founding, the Chinese Communist Party (CCP) has long targeted 2021 as the moment that China becomes a “moderately prosperous society” free of extreme poverty. The government is keen to use the celebrations to showcase Chinese prosperity and stability, but there are some clouds on the horizon.
The CCP’s congress is scheduled to present its next five-year plan in March that will offer more detail on its post-COVID economic roadmap. After orchestrating a fiscal and monetary response focused on supporting exporters and local governments, the plan’s approach to the challenge of balancing ongoing deleveraging with lagging consumer spending and employment figures will be closely watched. China’s suppression of COVID-19 has been central to its economic resilience, but with local lockdowns imposed a year after Wuhan’s lockdown began, vaccines would provide a powerful shot in the arm for its recovery. Any setbacks in distribution or effectiveness, however, could delay efforts to reinvigorate the service sector.
Externally, a backlash against a year of aggressive diplomacy could also darken the festive atmosphere. The Trump administration’s eleventh-hour designation of the crackdown in Xinjiang as genocide, backed by incoming Secretary of State Antony Blinken, will likely force other governments to take firmer positions on the issue. While China can count on many countries to stay in line, especially those waiting on affordable Sinovac and Sinopharm vaccines, it doesn’t bode well for any cooling of the trade tensions that have been a headwind for several years.
While the spectre of more sanctions also presents a risk to the plan’s increased foreign investment targets, a post-sanctions stock market boom driven by Asian and European buyers indicate that these fears may be overblown. It also points to a broader truth: China’s economic trajectory is no longer so dependent on the US. If anything is going to spoil the party, it seems more likely to come from the home front.
Whether China's economic fears are realised or turn out to be a false alarm, insurers around the world will need to keep an eye on developments in the region. To find out the latest developments and how they may impact the insurance industry, be sure to review Axco's non-life insurance reports.
This article first appeared in the Axco Flashpoints newsletter, which provides monthly analysis on emerging risks and geopolitics from our Global Risk Intelligence and Data (GRID) team. You can sign up at https://www.axcoinfo.com/axco-flashpoints-signup.aspx