Letter To Shanghai No 1175 - Realpolitik in real time

As a recap for those who did not see the Chinese data released on Saturday, the August NBS Manufacturing PMI fell to 49.1 (previous: 49.4, expected: 49.5). It was the fourth straight month of contraction and the steepest decline since February. Output prices also fell sharply (actual: 42.0, previous: 46.3). The PMI number is dire by any standards. But that does not mean a strategic shift in policy is imminent. Within the lesser subindices, two numbers stand out. The PMI for high-tech manufacturing increased (actual: 51.7, previous: 49.4), and the equipment manufacturing PMI also rose (actual: 51.2, previous: 49.5). Onshore pundits point out these numbers are improving against the general tide of contraction and indicate China's ongoing rotation from sunset towards high tech industries and, for some, confirm that China's industrial upgrade is underway. ?

Manufacturing crisis or not, the PMI numbers are nowhere to be found in today's copy of the People's Daily as the front page devotes itself to the impending Forum on China-Africa Cooperation (FOCAC). Under the banner of "Joining hands to promote modernisation and build a high-level Chinese-African community of destiny," the summit hosting 53 African nations will open in Beijing on 4th September for three days, and it is the largest domestic diplomatic event organised by China for some time. To underline its importance, the PD states the FOCAC summit is "not only a grand event for China and Africa, but also a significant event for the 'Global South' and the entire international community."

A second long article on the front page details China-Africa cooperation in the Xi Jinping era, the narrative of which presses home the Chinese policy points which I summarise. China's engagement with Africa is on equal terms, as a friend, and it is strategic in nature. China's economic commitment in African countries is creating value and opportunities for African businesses and, therefore, its people. Deepening China-Africa engagement represents the rise of the Global South. And finally, Xi Jinping is personally invested in deepening the China-Africa relationship.

As one would expect, the article goes on to list several areas of beneficial African Chinese cooperation. "China-Africa practical cooperation has yielded fruitful results, with trade volume increasing from $10.5 billion in 2000 to $282.1 billion in 2023, an increase of nearly 26 times. China's investment stock in Africa has increased from less than $500 million in 2000 to more than $40 billion at present. Over the years, China-Africa cooperation has built and upgraded nearly 100,000 kilometers of roads, more than 10,000 kilometers of railways, nearly 1,000 bridges and nearly 100 ports." But it was the smaller details that interested me: "By the end of March 2024, China had sent a total of 25,000 medical team members to Africa, treating approximately 230 million patients." Not only is that last number staggering, it is also important.

By hosting the FOCAC summit, China's ambitions in Africa are on full display. From the Beijing perspective, the partnership is seen as mutually beneficial, with African countries gaining infrastructure, investment, and development aid, while China secures access to resources and, most importantly, growing markets. China's African policies simultaneously protect supply lines and develop new marketplaces that offset potential falling US and European demand. ?By focusing on FOCAC, the PD is not discussing the recent manufacturing PMIs but informing China where manufacturing policy is going and why the shift to high tech is worth the sacrifice.

One might say China's relationship with the US is propelled on the American side at least by a certain moral idealism and a need for technological and manufacturing superiority that warps the Sino-US relationship until it becomes complex and illusive. Both participants hold a different interpretation of the Sino-US relationship that ultimately prevents it from ever being resolved.

On the other hand, China's relationship with Africa is a pragmatic, mercantile/power approach, focusing on the practical objectives and national interests of all participants. Although it will likely be ignored by US and other Western media, in Beijing this week will be a fascinating display of realpolitik in real time.

Have a good day,

John