Dan Wang just published another annual letter, another Good Read. It is such a delight to read that I want to post my reactions here.
Dan’s 2022 letter starts with a lighter note, where he talked about Yunnan province, where he spent most of his time during the Covid lockdown in China for about 2 years. “People visit the province for its spectacular nature views: rainforest, rice terraces, fast rivers, and snowy mountains. Otherwise tourists are drawn to its ethnic exoticism.“
Dan spent most of his time in the north-central city of Dali, which has a temperate climate and offers fertile farmland, attracting China’s burgeoning organic farmers, who are often youths. Dali also has a significant foreign population that has set up sourdough bakeries, cafés with excellent croissant, and clubs playing techno.
Mountains have always beckoned to dissenters, rebels, and subversives. It is not only the air that thins out at higher elevations: the tendrils of the state do too.
Such a powerful statement.
From there, he started to talk about the Chinese state, politics, the communist party, the economy, and of course, the Shanghai lockdown.
I strongly encourage you to read this letter in full to really appreciate its content and enjoy it. However, if you want to get some main points from his letter, here they are:
- As Dan looked back in 2022, the three most important events in China in 2022 were the zero-Covid policy, the greater centralization of political power under president Xi Jinping, and the declaration of a “limitless friendship” with Russia.
- In the short term, the suffering under three years of zero-Covid will likely be forgotten as people in China are exuberant in enjoying life once again.
However, in the long term, these events confirm that pursuing economic growth is secondary.
- China’s problem is usually not too little state capacity, but too much.
- The events in 2022 have led two groups of people to express changes of heart on China: the foreign business community and young, educated Chinese.
- Multinationals are becoming more hesitant to invest in China.
- Young, educated Chinese are becoming increasingly alienated due to the government’s tightening course and cultural creativity being strangled.
In 2022, most films released in China were either nationalist blockbusters or sappy romances, video games received few licenses, and book publishing slowed due to the party congress.
- China’s per capita GDP is one-sixth the level of America’s and has room for economic growth, despite headwinds such as a structural peak in the property sector and decoupling from the western world.
- China has tailwinds in particular sectors, such as dominating renewables and becoming a larger auto exporter than Germany.
- China’s technology competitiveness is grounded in manufacturing capabilities rather than scientific research.
His outlook for the next few years:
- Growth will slow further, and the economy will not return to 2019 mid-single digit levels of growth but will be closer to US levels.
- China is likely to succeed on many technological endeavors, but these bright spots can’t compensate for broad deceleration.
- The political system is more likely to squash growth in the longer run.
- Unforced errors may continue to be made that alienate foreign businesses, European governments, domestic artists, and entrepreneurs.
Plenty of food for thought 🙂
I hope you enjoy this letter too.