China's leaders plan to prioritize industrial policies in 2024 aimed at spurring domestic consumer demand. According to China Beige Book Co-Founder and CEO Leland Miller, the last few years show that "China's economic growth model has evolved." Although President Xi Jinping is unlikely to push massive stimulus policies simply to boost markets and returns for investors, Miller believes Beijing will still "do enough" to keep financial markets afloat.
When asked whether China is decoupling from the global economy, Miller tells Yahoo Finance this is not occurring, as evidenced by China's ongoing trade surpluses with many nations. However, he states that President Xi continues backing domestic regulations that "make foreign investors squeamish" about putting money into China.
Finally, on the chip rivalry between China and the United States, Miller argues it seems more "like a pillow fight, not a chip war."
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SEANA SMITH: How do you see this initiative here shaping or lack thereof China's recovery as we look ahead to the new year?
LELAND MILLER: Well, my big question is, where these investors are getting their expectations from? Because it's been very clear in 2021, then 2022, then 2023, and now going into 2024 that China's economic growth model has evolved, that there's a completely different stimulus playbook and right now, and that Xi Jinping has no interest in using big bang stimulus in order to juice investor returns, in order to surge the stock market, in order to bring back artificially high levels of growth.
And so the idea that every three months, investors are disappointed by this sort of begs the question, why are they not smarter at this point? So I think the expectations right now should be very close to what they've been in the past, which is Beijing will do enough to make sure that the growth doesn't fall off too much. There will be a fiscal push in 2024, just like there was a monetary push in 2023. But the expectations should be tamed in terms of what they are going for. They want to make sure they stabilize the economy, not juice it.
BRAD SMITH: Earlier in the show, our own Jared Blikre had mentioned that China has decoupled from the rest of the world as he was taking a look at some of the movers earlier this morning here. Does this seem like a China that wants to re couple, that wants to re initiate conversations and deal-making with the rest of the world from your perspective?
LELAND MILLER: Well, the word decoupling is used in a lot of different ways. And if you look at broad decoupling, China hasn't decoupled from the rest of the world. Just look at the trade surplus that China runs with everyone, including the United States. Look, in specific sectors, there is decoupling. If you look at technology, there is an effort right now to decouple the US and Chinese economies for instance. But decoupling is overused. It's still two very interwoven economies.
The problem is that China keeps pushing forth domestic policies that make foreign investors squeamish. They don't want to go to China and be arrested. They don't want to have problems with where they store their data. They don't want to have problems with political crackdowns and other things. So the domestic environment for investing is not very good right now. And so Xi Jinping is having a hard time bringing in more investment.
SEANA SMITH: Yeah. Leland, to that point, we had some headlines here this week that the US is in talks with NVIDIA about allowing some sales of some of their AI chips to China. In terms of the trade war that's been going on, the chip war that's been going on between the US and China, has that at all been effective in terms of your checks and what you're seeing on the ground in China?
LELAND MILLER: No, not at all. It's not a serious-- it's a pillow fight, not a chip war. I mean, if you look at what happens right now, all the chip makers basically live at the White House pushing for the regulations to be eased and eased and eased. The reality is that there is not broad ban on sending advanced technology to China. The headlines say there is. But you don't have broad prohibitions for the most part on sending this technology. What you have is a licensing regime.
The Department of Commerce evaluates those licenses behind closed doors and overwhelmingly approves these licenses. These are for foreign firms. These are for Chinese firms. These are for US and foreign firms selling to the Chinese market. Most of this continues to go on. So there is not this wall that being set up and in which case US technology and Western technology is not flowing to China. There are Swiss cheese holes in it. And right now, chip makers are driving cars through them.