The “everything bull market” is gone. Stocks are way down, real estate is caught on a shaky bridge between slower demand and higher lending rates. Stagnation is in the air. “RIP Good Times” — a somber 2008 column by Silicon Valley venture capital firm Sequoia Capital — has resurfaced.
Earlier in the year, I asked if the decade of the 2020s would keep up with the Roaring 1920s. A hundred years ago, life was changed forever by the technology-driven wonders of the day: radio, affordable cars, skyscrapers, electrification, powered farm machinery.
Like the 2020s, the 1920s started badly. The aftermath of World War I led to deflation for the winners and inflation for the losers. The global trade consensus that was strong before World War I began to crumble. Fascism and Communism have taken root. The 1918 Spanish flu killed 50 million people worldwide. The US stock market collapsed in 1920-21, leading to what historians now call the “mini-depression.” And yet from 1922 to 1929—seven fat years—parts of the world boomed like never before.
Could this happen again? Earlier this year I said it would. In mid-2022, my hunch looks bad. We’ve seen trillions lost in the stock markets. Russia’s invasion of Ukraine and China’s self-destructive zero-Covid policy are incredibly damaging. pessimism curbs. The bad mood in the US and in Silicon Valley, from where I am writing, rivals that of late 2008, when the global financial system was on the brink of collapse.
But yeah, I’m still optimistic about the 2020s. call me crazy My argument boils down to one word: China. China has weighed heavily on global growth expectations. But that will change by the end of the year. I share the view of chief strategist Marko Papic of California’s Clocktower Group. Papic says, “We continue to maintain that the Chinese Communist Party’s top priority is to instill the ‘China Dream’ in its citizens.” China’s top priority is not to extradite Taiwan, Papic says. (Not this decade.)
It’s not about undoing capitalism and destroying its entrepreneurs. (Crain them, yes.) It’s not about using zero Covid as an excuse to reapply the extreme social control of the Mao era. (Not even close.) China knows that if it does any of these things, it won’t continue on its 40-year streak of prosperity. It cannot deliver the China Dream to its citizens. No dream, no social stability, which is what China values most.
China needs to get better to get richer. It needs to become a better neighbor and citizen. This is of course my Westerner’s perspective, but it is a view I hear from my Southeast Asian friends. Analyst Papic says that if Beijing were to overemphasize the geopolitical goal of reunification with Taiwan, it would inevitably jeopardize its primary policy of creating an ever-improving quality of life for the average Chinese. If any good comes from Russia’s invasion of Ukraine, Beijing will conclude how long and hard an occupied territory is holding out and how costly the whole deal is for the invader.
To resume growth, to feed the China Dream for its citizens, China needs energy. Lots of it. China can vociferously assert its dotted territorial rights in the South China Sea, but it cannot afford to transgress them and impose a naval blockade by the US and its allies. The same logic applies to the Strait of Malacca between Malaysia, Singapore and Indonesia and the Strait of Hormuz near the Middle East oil fields. To realize the dream of prosperity, China needs open seas and trade routes more than control over a few tiny islands or waterways.
As such, I believe the world’s most important geopolitical event in 2022 – and perhaps the one that will decide whether the 2020s will roar – is yet to come. It will be the 20th National Congress of China’s ruling party in November. Then China will consider its options and actions, costs and benefits. I bet China is moving towards continued prosperity rather than the other way around. That would be good for China’s citizens, good for the world, and good for a Golden 2020.