Dear Members and Friends

The New Year has begun and 2023 has ended on a rather warm note. I hope you all had time to rest and relax over the holidays.

2024 looks set to be another challenging year. It begins with the WEF annual meeting in Davos – and with the CNY only on 10 February, a significant number of Chinese delegations are expected to travel to Switzerland before and after the Davos meetings. Early indications are that the event will be even bigger than in 2020.

It will be an important year for China as we celebrate the 75th anniversary of the founding of the People's Republic of China on 1 October. Let me share some thoughts on where we see China going. The economic situation in China in the coming year will be difficult. The challenges are many, whether it is the problems in the property sector or the employment situation. With deflationary trends in factory gate prices and, to some extent, property prices, buyers of both goods and housing will remain on the sidelines until they feel that prices will not fall further, and the economy as a whole has stabilized. This has implications for the industries that feed the property market, which will have to rethink their business models and make some rather fundamental changes.

As a result, the employment situation in China will be challenging for graduates and workers with little professional experience, as well as for workers over the age of 40. Employers’ expectations of loyalty and working hours will remain high and discourage many. This will further fuel the ‘lie low’ attitude of the workforce, which has become disillusioned in recent years.

These characteristics are new observations for those who have been following the Chinese economy for the past few decades. Compared to the markets in Europe, America and Southeast Asia, the Chinese markets seem to be becoming more ‘normal’. This is a development that we mentioned in the December 2023 newsletter.

Looking further at the internationalization of Chinese companies following the regionalization of supply chains, Chinese entrepreneurs are willing to enter markets and operate business models that they had previously shunned due to higher returns in Chinese markets.

At the end of 2024, how will we assess the situation? The challenges in isolation or the development of China into a normal market? Can we therefore apply the predictability of other mature markets, or does the nature of the system not allow it?  What we know for sure is that there will be surprises, not only in the form of black swans and grey rhinos, but also in the form of government statements and actions to find solutions. In the light of the 75 years celebrations the government is expected to step up to not only to provide a secure environment for its citizen but also create a stable economic environment. The recent announcements to stabilize the housing market are an example of policy changes that market participants have been waiting for and that will create stability.

We wish each of you an energetic, passionate, purposeful, and mission-filled start to 2024. The next newsletter will be sent out in early February 2024.

Kind regards

Shī fù lǐng jìn mén, xiū xíng kào gè rén.

Your teacher can open the door but you must enter by yourself.