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Fareed Zakaria GPS

Top Global Risks For 2023; Economic Shifts To Expect In 2023; Daughter of Jailed Russia Opposition Figure Speaks Out. Aired 10-11a ET

Aired January 08, 2023 - 10:00   ET



FAREED ZAKARIA, CNN ANCHOR: This is GPS, the GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.


ZAKARIA (voice-over): Today on the program, President Putin's most formidable political rival was locked up two years ago. But Alexei Navalny still has a voice. His message carried on by his inner circle one that inspires Russia's opposition movement.

I have an exclusive interview with his daughter, Dasha, on the state of her father and his mission to bring democracy to Russia.

And what might befall the world in 2023? Ian Bremmer will lay out the biggest global political risk of the new year.

IAN BREMMER, PRESIDENT, EURASIA GROUP: The biggest risk is clearly Putin, acting as the most powerful rogue state that we've ever dealt with in history.

ZAKARIA: And Ruchir Sharma will give the economic outlook.


ZAKARIA: But first, here's "My Take."

It was hard not to be fixated on the drama that unfolded in the House of Representatives this week where the Republican Party had a nervous breakdown in full public view. This crisis was entirely of the party's own making.

For decades, it has whipped its base into a righteous fury by promising radical policies that offer emotional satisfaction to their hardline constituents, from rolling back Medicare and Social Security, to defaulting on the national debt, to eliminating whole government agencies.

But because these policies are totally unworkable, they never happened. The lesson that the base has internalized is that it was constantly being betrayed by cowardly moderates. The solution now is to maintain a permanent vice grip on the speaker, ensuring that he will always do what the hardliners want. This is, as many have noted, a recipe for permanent blackmail and constant chaos.

The Republican Party's troubles are severe. Newt Gingrich told Axios that the party is in its worst shape in almost six decades. But it is not alone. In many countries around the world, populists are flailing. Look at Britain, where Brexit, perhaps the ultimate 21st century populist cause, has caused havoc within the Conservative Party, which used to be described as the world's oldest most successful political party.

Britain has had five prime ministers in the six years since 2016. The prior five prime ministers spanned more than 30 years. The self- defeating decision to exit its largest market, the European Union, continues to depress the country's economic prospects, and Britain remains the weakest of the G7 economies. In the G20, only Russia is projected to do worse than Britain in the near future.

The story is similar in South America. Even though that continent has been swept up in populism from both the right and the left, neither version is doing very well. In Brazil, Jair Bolsonaro lost his bid for re-election, but the winner, former President Lula, will also find it hard to implement some of his more radical promises.

In Chile, left-wing populist coalesced around a plan to completely redo the country's constitution putting forward a new one that even many left-of-center politicians regarded as extreme and unworkable. In the ensuing referendum, 86 percent of Chileans turned out rejecting the new constitution by a whopping 62 percent.

On the other side of the globe in Australia, right-wing politicians had embraced Trump-style policies and rhetoric. Under Prime Minister Scott Morrison, they spoke a language that mirrored the grievance politics of older white voters and scared the country about the dangers of immigration, crime, and so-called African gangs that was supposedly marauding through Victoria.

But he bungled the COVID pandemic and had little success with the economy. In the recent elections, Australia's conservatives suffered their worst loss ever. And the even more extreme united Australia and one-nation parties did poorly as well. The new labor prime minister currently enjoys an extraordinarily high approval rating.


Why is this happening?

Well, populism thrives as an opposition movement. It denounces the establishment, encourages fears and conspiracy theories about nefarious ruling elites and promises emotional responses rather than actual programs. For example, build the wall, ban immigration, stop trade. But once in government the shallowness of these policy proposals is exposed and leaders can't blame others as easily.

Meanwhile, if non-populist forces are sensible and actually get things done, they defang some of the populist right. Look at America where Joe Biden's moderate style, serious demeanor and practical policymaking have given him large legislative accomplishments without triggering a massive electoral backlash.

Now he benefits by being an old white man. Had Barack Obama enacted the same policies as Joe Biden, I have a feeling we would hear much more talk of his dangerous socialism and un-American policies, complete with racial innuendos.

The poster child for populism has always been Argentina. Juan Peron and his even more charismatic wife Eva built a powerful mass movement that attacked the old elites and promised to become the voice of the people. In fact, they destroyed Argentina's economy. What had once been one of the world's wealthiest countries in the 1910s was only a few decades later a basket case economy.

Ever since Argentine populists have promised voters the moon, run up staggering debts, and then routinely defaulted. But now things have soured for them. Prompting the economists to observe that Argentina's populist movement is at its lowest end. Former President Eduardo Duhalde told a magazine, Peronism is obviously the main culprit for the situation of Argentina, saying, "Today we are in our worst moment."

These trends are not permanent. The world's complicated problems always allow for someone who proposes answers that are simple, seductive, and wrong. But let us hope that 2023 will see populism exposed for the sham that it is.

Go to for a link to my "Washington Post" column this week, and let's get started.

Putin out. That was the slogan at a protest in Moscow in December 2011. The BBC called it the biggest anti-government rally there since the fall of the Soviet Union. Prior to the rally, its organizer was a man living known outside certain Russian circles, a blogger named Alexei Navalny. He told reporters at the time that Russia was ripe for revolution, and that Putin's party was one of swindlers and thieves.

Over the next decade he became known worldwide as a thorn in Putin's side. He was always seemingly being arrested or investigated, or tried for one charge or another. Charges Navalny says were all trumped up. But he was steadfast, continuing to agitate the elite as he agitated for democracy. Then this happened.

Those were Navalny's groans after being poisoned with a chemical nerve agent called Novichok. CNN and the investigative group Bellingcat found evidence that an elite Russian spy team that specialized in nerve agents had been trailing Navalny for years. Five months after he was attacked, Navalny returned to his homeland, having mostly recovered from the attack and knowing he faced prison time in Russia for a prior conviction. He was arrested on arrival.

Today, Navalny is in a maximum security prison where he is in and out of solitary confinement, has little contact with his lawyers, and can only communicate with his family by letters, many of which disappear enroute to their intended recipient.

He is the subject of an extraordinary documentary from CNN Films called simply "NAVALNY." As award season approaches, the film has generated a ton of buzz and it will air on CNN on January 14th at 9:00 p.m. It's also available on HBO MAX.

Navalny's brave daughter, Dasha, joins me now exclusively.

Dasha Navalnaya, welcome.

DASHA NAVALNAYA, DAUGHTER OF ALEXEI NAVALNY: Thank you so much for having me.

ZAKARIA: So first tell us what is the latest on your father's condition? He is in -- I imagine Russian prisons are not that great.


NAVALNAYA: Yes. Well, no one wants to be in a prison overall, but Russian prisons take it to a whole another level. My father is currently, for three months now, he has been in solitary confinement in a penal colony. And it's a small cell, six, seven by eight feet, and it can be called a cage for someone who is of his 6'3" height. He only has one armed stool which is sewed to the floor and out of personal possessions he is allowed to have a mug, a toothbrush, and one book.

Currently, he has some bad back problems and he has been trying to get in touch with doctors, and he's been complaining a lot to the prison guards and the prison administration. But the prison doctor visited him once, prescribed him with injections that are not really helping him, and they're not giving us the medication name, a diagnosis, or even refusing to tell us the name of the doctor who is treating him.

ZAKARIA: Everybody I have talked to who has been through solitary confinement says it is hell. It is the worst form of punishment. And for three months you say he's been there?

NAVALNAYA: Yes. Well, people -- he's been in solitary confinement nine times now. And what they do, what to say that, you know, he's not in solitary confinement for such a long time, is they put him in for a week, then take him out for one day, and then say, well, now you violated another rule, so we're going to put you back into solitary confinement. All together for since August now, so for almost four months now he has been in solitary confinement.

ZAKARIA: There's this amazing moment in the film, "Navalny," where your father is impersonating the national security adviser to Putin, and he asks the people who he thinks poisoned him whether they -- and the guy starts explaining what he did.


(BEGIN VIDEO CLIP) ALEXEI NAVALNY, RUSSIAN ACTIVIST (through text translation): I'm calling Alexandrov, Makshakov, Tayakin, and I will ask each of them to briefly explain what went wrong and what should be done next time to succeed. UNIDENTIFIED MALE (through text translation): I have been wandering

the same thing myself. I would rate the job as well done. We did it just as planned, the way we rehearsed many times. But in our profession as you know there are lots of unknowns and nuances.


ZAKARIA: Now, you know, as a dramatic moment in the movie, it's amazing. But you, how did you react when you're seeing the government of Russia is now admitting that they were basically trying to poison to kill your father.

NAVALNAYA: Right, well, the thing about the Russian government, I would say Putin's government officials, is that they've been unlawfully doing everything they wanted for so long, that they -- their cockiness caught up to them.

And one of the people didn't even think that it was a possibility for not a government official to be calling them and asking them about this. They didn't even think it was possible for us to investigate the poisoning, and find out what really happened. So I'm happy that he spoke out (INAUDIBLE) spoke about it. I mean, he didn't speak out about it, but he --

ZAKARIA: Accidentally.

NAVALNAYA: Yes, accidentally spilled everything. But I'm -- you know, it's like we said in the movie, it's scary because he's probably now in hiding or killed because --

ZAKARIA: Because of that conversation.

NAVALNAYA: Yes. Of course.

ZAKARIA: And you've dealt with this your whole life. Your mother was arrested. You've had uncles who are in jail. What is it like growing up? I mean, I'm thinking you as the Stanford undergraduate, and people at Stanford are sitting around worrying about what's the best app to deliver pizza or how are they going to get the best offer from Apple. And how are you able to maintain the ability to be, you know, fully at Stanford while you have this whole other thing going on in the back of your head?

NAVALNAYA: It's a strange situation. I am definitely managing it more now that I've grown up because in middle school, you know, I was still trying to figure out what I wanted to do with my life while balancing my dad running for president and my dad being arrested.


But like I said, before having this incredible support system that's been around me my entire life, my grandparents, who very supportive of what my dad does, my mom who's just a champion and so compassionate and incredible, and a father who is not only a great politician but an amazing, warm, smart dad, it makes it easier to navigate the world of politics when you're 21. ZAKARIA: We'll be back in a moment with much more of the story of the

Navalnys. After all of this, after almost being called, Alexei Navalny decided to go back to Russia where he had at best a very uncertain fate. Did his daughter Dasha counsel him not to go? I'll ask her on the other side of the break.



ZAKARIA: We are back with Dasha Navalnaya, daughter of the jailed Russian opposition leader, Alexei Navalny. CNN will air a film about his life called simply "NAVALNY" next Saturday, January 14th at 9:00 p.m.

So, Dasha, I want to take you to that moment where you realize after he has been arrested, imprisoned, they have attempted to poison him, he's been if a coma, he comes out of this, he decides to go back to Russia. He must have realized that what is going to happen when he goes back to Russia is not good.

He's going to get arrested, possibly -- they tried to kill him just months earlier. At that point, did you tell him, dad, don't go back? You're comfortably here in the West, organized opposition from Germany, from America, from Stanford.

NAVALNAYA: Well, of course, there was this little voice in the back of my head saying, you know, cuff him to your hand and never let go. You want your dad being by your side. But we never had a family conversation of whether he is going to go back. It was always something that we accepted as a family. We knew that he would want to go back.

You know, he's a Russian politician. We're a Russian family. You can't do Russian politics from abroad. You can't help a country being more prosperous and free from, you know, being on the West, in the Western country and living in a flat in New York and doing politics like that. So I'm happy.

ZAKARIA: And he's a great Russian -- I mean, this is obvious, but what might be worth reminding, you know, he loves Russia. He adores Russian culture. He taught you, you know, Pushkin, right?

NAVALNAYA: Yes, yes. He loves Russian literature. He gave that love to me. As a whole family, whenever we travel somewhere for summer vacation when I was little, we would always rate the cities, and Moscow would always be at the top. Because, you know, it's our home, we love it.

My whole family is there. My grandparents are there. My uncle is there. I -- whenever we have -- it makes -- it makes this work so much easier knowing that we're patriotic towards our country, and that we actually love the culture and the people, and, you know, I grew up in Moscow and I want to go back.

ZAKARIA: Now, you haven't seen your father in a while. The last time was -- you visited him in jail?

NAVALNAYA: Yes, I visited him in jail for my birthday a year and a half ago, September 2021. And it was -- it was the second time I visited him in prison. The first time was as he was going through a hunger strike, so it was -- it was definitely nerve-racking, you know, a child seeing their parent being imprisoned and not looking healthy. But the last time I saw him, he looked better. At least he was eating. So that made me happy.

And the last time I talked to him was a year ago on New Year's. They allowed him to have a five-minute phone call. But you know how you probably have seen in spy movies, whenever there is a muffing sound, you know that the phone call is being taped.

And for some reason the prison administration thinks that we're going to be talking about something secretive during the phone calls on New Year's, so for the whole phone call for five minutes, it was just going back and forth with hello, hello, can you hear me? Hello, can you hear me? And then just the muffing sound.

But I'm happy that the attorneys are getting to see him. I'm definitely -- that's something that is making me very happy is that there is people who, you know, there to see that he is not doing terribly, although his prison conditions are far worse and getting worse by the day.

ZAKARIA: So I doubt very much that Russian media will air this interview. But there are ways that things get around. If your father were to be watching, what would you say to him?


NAVALNAYA: I would say that we're there for him, and that we're doing everything we can possible to get him out and change the regime and, you know, educate people, and that we're continuing the work that he started a long time ago, and that he shouldn't give up, and I'm proud of him. That's the most important thing. I'm proud of my dad.

ZAKARIA: Dasha Navalny, pleasure to have you on.

NAVALNAYA: Thank you.

ZAKARIA: Next on GPS, what will 2023 bring for politics around the world, good, bad, and ugly? I ask Ian Bremmer, who has been looking into his crystal ball.


ZAKARIA: A new year means a fresh start, right? Well, that can be true for you and me with resolutions and the like, but not for global politics. For starters, the war in Ukraine hasn't stopped, indeed it's been heating up. And the threat of China invading Taiwan didn't disappear when the clock struck 12:00 on the 31st. So what are the biggest risks of 2023?

[10:30:00] Joining me now is Ian Bremmer. Ian. He is the president of Eurasia Group which has just published its top risks report for 2023. Ian, without further ado, what is the biggest risk the world faces in 2023?

IAN BREMMER, PRESIDENT, EURASIA GROUP: The biggest risk is clearly Putin acting as a rogue, the most powerful rogue state that we've ever dealt with in history. But more broadly, the top risk report this year is all about a small group of individuals that don't have checks and balances, they don't have good information coming to them. They can make really big mistakes that are very disruptive. And Putin is the biggest -- the most emblematic example of that.

But there are others. Xi Jinping, the Iranian supreme leader and a lot of individuals in the technology space. Very different than when we were all worried that democracies were falling apart. This is a different year.

ZAKARIA: You talk about technology space and obviously you're thinking of Musk. Do you think that in general big tech has -- because of that, there is a certain kind of dictatorship. You know, I mean, Mark Zuckerberg runs Facebook without any checks or balances. Do you think that has led to a lot of bad decision making?

BREMMER: I think it has led to a lot of decision making which is deeply dangerous for civil society and democracy. I mean, I think about you and I growing up and doing our PhDs at the end of the Cold War. And back then, the United States was the leading exporter of democracy. Sometimes, you know, with bad outcomes and frequently hypocritically, but nonetheless, right, today, 30 years later, the United States is the principal exporter of tools that destroy democracy and it's because these tools --

ZAKARIA: And you're talking social media mostly.

BREMMER: I'm talking A.I. algorithms. I'm talking generative A.I. I'm talking about increasingly the ability through these tools, for you and I not to be able to differentiate between a real human being and an A.I. bot.

And the disinformation that comes from that, the polarization that comes from that, yes, on the social media platforms but it's not the social media it's the A.I. algorithms that's driving this. This is deeply destructive of democracies, and it also helps to strengthen and consolidate authoritarian regimes. So it's a real problem, even though it's not the intention of the people that actually are in charge of these things.

ZAKARIA: You're right, that A.I. accelerates it, but does strike me that social media has this tendency to narrow, to allow you to find your group of crazies or, you know, fanatics, and as a result expands that power. So, look at what's happening in Congress, you know, with the craziness that the Republican Party is going through.

One of the reasons it seems to me this is happening is that the way you get famous in Congress, in the United States Congress these days, is not by serving on committees, doing a good job, pleasing the leadership, moving up, it's by being great on social media.

You can -- you know, you can raise funds for the party, you become a celebrity. So it's that same tendency that destroys hierarchy, destroys order, destroys institutions.

BREMMER: And yet it's not where the population actually is. The United States' population, like Canada, like Europe, like Japan, is a bell curve, right? We see that on issues like abortion.

Most Americans don't want abortion always to be legal in every case, and they don't want it to always be illegal and banned in every case. They want it to be safe and rare and legal. And 13, 15 weeks is where you kind of hit, right? And we've seen 50 years as a compromise it allowed that. And unfortunately, the politics moved in a much more extreme direction.

Social media and algorithmic alignment is basically taking the smallest portions of the population making them the loudest, making them the most profitable, making them move politics. And the United States is not principally at risk from this. It's the weaker, more brittle democracies that are in the most danger.

ZAKARIA: You talk about an energy crunch. Help us understand what is going to -- what is the world of energy going to look like with all the problems that we have, the Russia/Ukraine war, all the rest of it?

BREMMER: Two big issues in 2023. The first is the fact that the Europeans are fundamentally decoupled from Russia, especially when it comes to gas. It means that their input costs are structurally so much higher for the foreseeable future, from the United States, from the western hemisphere and from much of Asia.

And what that means is de-industrialization. A lot of their corporations are just going to leave and they're not going to come back. It's a real negative impact on Europe.

Second, the Europeans at least have the money when things get ugly to pay for the inputs to ensure that their middle classes, their working classes are taken care of. The developing world does not. So, if you're not a commodity exporter in the developing world, you're going to face a serious fiscal crunch, lots more social instability, maybe emerging market financial crisis.


ZAKARIA: I want to end on that point. You talk about arrested global development. This is something that strikes me. You know, we have spent the last few years talking about, oh, you know, we overdid globalization, we overdid, you know, market reforms.

The problem is, the only way to grow, the only way to raise incomes is by embracing markets and trade and all that. And all of these developments, the populist wave that has shutdown a lot of that, and brought tariff barriers up, you can see the data. It's the poorest people in the poorest countries of the world who are struggling. BREMMER: And particularly the women in the poorest part of the world. And through the pandemic and through the Russian invasion, and through the populist backlash, you now have all these structural realities that mean that poorest countries in the world cannot take care of their poor.

And so, instead of every year moving more people out of poverty as we have for decades we are now seeing the world move more people into poverty, move them out of the schools, move them into the informal economy, increasingly even moving them into sexual trafficking, for example, human trafficking, forced marriage. Nobody wants to see a world that looks like it's anti-progress. And yet for a majority of the world's 8 billion in 2023, progress is not for them.

ZAKARIA: Ian Bremmer, always good to talk to you.

BREMMER: Happy New Year, man.

ZAKARIA: Happy New Year.

Next on GPS, we look at the economic outlook for 2023, when we come back.



ZAKARIA: 2022 was a rocky year for the economy. Growth slowed, inflation ran rampant, and the stock market plummeted. What will the economy look like in 2023? Investor and writer Ruchir Sharma has a new piece in the "Financial Times" laying out some big shifts he expects to see this year and beyond. Ruchir, welcome.


ZAKARIA: So, the conceit here is that all of the rules of the last decade have been overturned. Why? What do you think has happened?

SHARMA: Well, I think that the main event -- it is from an economic perspective has been the incredibly tightening by the Federal Reserve. That the era of easy money which we had with zero interest rates, a lot of quantitative easing, that has come to an abrupt end.

And so, many of the rules which apply when the fed was running easy money policy, where governments could run large deficits, get away with it, because funding was relatively easy, the cost of funding was very low, those rules have changed. And many leaders across the world have still not got this memo. They are still trying to spend and still trying to sort of rule as if they're in an easy money era.

ZAKARIA: And the best example of this is, of course, Liz Truss in Britain, right?

SHARMA: Yes. That's the best example and the most prominent example. And then you have lots of other countries now all of a sudden facing the prospect of default. So many countries in Africa, even in places such as Pakistan, Egypt, all these are struggling just now. And the political leaders in all these countries are now being forced to bow to the markets and do what the markets are telling them, which is that you have got to have fiscal rectitude, you've got to have monetary orthodoxy, or you end up becoming a Turkey and Argentina that's kicked off the grid and loses complete access to funding and markets and become economic basket cases.

ZAKARIA: It reminds of when Clinton came to power, that whole White House, 1992, was terrified about the bond market. You know, James Carville used to joke, when I get reincarnated, I want to come back as the bond market because the bond market scares the hell out of everyone.

Well, for 30 years people forgot about the bond market. And now the bond market is really back, except in one country. I want to ask you about the United States, where we seem to think because of the dollar, we can print as much money as we want. But you say we may be at peak dollar.

SHARMA: Yes. I think, there's a lot of hubris on that. But even if you look at America it clearly made a mistake in the amount of stimulus that they put to work. We are seeing the consequences of that. Still relatively high inflation, even though it's coming off, and all this monetary tightening. And look at the stock market, very tough year in 2022.

So I think that there are consequences of this which even America is facing. But yes, there is still hubris but because of the reserved currency we can get away with it. And my warning is, don't be so confident, that we have seen what happened in the U.K., we have seen, you know, what has happened in so many other countries. The markets really get in a punishing mood, their sentiment can turn very abruptly.

The dollar has had incredible value over the last few years, but I think the seeds are now being sown for why the demise of the dollar may have begun. The dollar has peaked against most major currencies. And also, Fareed, this very important geopolitical point, which is the fact that even though America used sanctions, and you can argue if it was morally correct to use those sanctions against Russia, but the way it used the sanctions by weaponizing the dollar, that I think will have long-term consequences. There are so many countries around the world now which are thinking that they could also -- even though it may be an irrational fear, that fear has crept in, that maybe even they could face such an event. And so --

ZAKARIA: And the only solution is get out of dollars.

SHARMA: Exactly. In terms trying trade directly in your own currency.

ZAKARIA: End of big tech. People have been saying -- every time the tech stocks go down, people have been saying, this is the end of big tech. And it didn't prove to be the case after the crash in '99. It doesn't prove to be the case after '08. What makes you think that this time, you know, these companies like Apple, Microsoft, Google, that have so dominated the world, why do you think it's -- you know, they're on the way down?

SHARMA: You know, Fareed, I mean, in fact if you look at the list of the top 10 companies in the world by market value, at the beginning of each decade, and then you compare it to the subsequent decade, just a decade later, it's a fascinating statistic.


Nine of those top 10 companies typically fall off the top 10 list. That's what the creative destruction element of capitalism is all about. Once you get to such an elevated level, that sows the seeds of your own demise.

And so, therefore, as an investor, I would not be allocating any capital, even though one or two of them will do well and survive the odds are against you. But 80 percent to 90 percent of companies in the top 10 list at the start of a decade are usually not there a decade later. And I think that process has begun now with higher interest rates.

ZAKARIA: And with that same cyclical process, in a sense, you're say there is an element here, a peak America, and it's now time for the rest of the world, particularly their stocks and things, to rally. Explain the logic behind that.

SHARMA: Well, there's one simple statistic out here which is that America today is about 25 -- 26 percent of the global economy. But if you look at America's share in global stock markets, what the value is, 60 percent. That is way high. So America is punching well above its weight as far as global stock market value is concerned.

ZAKARIA: (INAUDIBLE). America is four percent of the world's population.


ZAKARIA: Twenty-five percent of the world's economy, economic output. But 60 percent of the total stock market valuations of all the stock markets in the world put together is just America.

SHARMA: Exactly. And I think that this is very telling, because it's not -- a lot of people come back and tell me that, yes, but America has always been the world's dominant financial super power, it has always been a great capitalist system. And so, it will always have the world's largest stock market, true. But that number for much of post war history was closer to 40 percent -- about 40 -- 45 percent, never this high. So the American stock market, in a way relative to the rest of the world, has never been this expensive.

ZAKARIA: Ruchir Sharma, pleasure to have you on.

SHARMA: Thanks, Fareed.

ZAKARIA: Next on GPS, when China lifted its draconian COVID restrictions, it unleashed a wave of disease across the country. But what does China's reopening mean for the rest of the world? I'll explain when we come back.



ZAKARIA: Now, for the last look. Today marks the end of an era in the global pandemic. After two years, nine months, and 11 days of near complete isolation from the outside world, the government of China finally flung open the country's borders. It's a major piece of the stunning reversal of Xi Jinping's zero COVID policy.

Gone are mass testing regimens and draconian quarantine requirements both for Chinese citizens and international travelers. Gone too are the stringent lockdowns that shutdown city life for months on end.

Most of the headlines about this development have focused on the wave of COVID cases that has predictably sprung up in the country, overwhelming hospitals and snarling production on factory floors. But China's reopening is bigger than a rash of COVID cases troubling though they are. As "The Economist" reports, China's reopening signifies a massive jolt to the global economy.

In the near term, economic activity may be slow to rebound, but soon enough Chinese tourists will begin booking flights and traveling aboard. As a travel expert told the FT, before the pandemic, China was the world's single largest source of international tourist. "The Economist" notes that Chinese households saved 1/3 of their income last year, and that this year, one estimate has household consumption bouncing back by nine percent.

The government wants to revive the beleaguered property sector. And if it does, Chinese families may start investing in real estate again, which could kick off a burst of construction. Factories will reopen and build capacity. Investment will rise. Business executives will begin visiting the country again. Restaurants and shops and cities will all come to life.

To understand how big a change all of this would be, look at how depressed the Chinese economy has been. GDP growth plummeted from 8.1 percent in 2021 to around three percent last year. In November, exports fell 8.7 percent, compared to the year before. Exports to the U.S. fell 25 percent in the same period.

HSBC estimates that in the first quarter of 2024, China's GDP could be 10 percent higher than it will be this quarter. According to the "Economist," that means that China could account for 2/3 of global growth next year.

All of this may seem like good news, but remember that the pandemic has roiled supply chains, and the Russian invasion of Ukraine has distorted energy markets. So all this good news could easily turn bad. That's because hundreds of millions of Chinese consumers clamoring for global goods and services again would represent a massive rise in demand and that could lead to something we're all too familiar with in recent months, inflation. Look at energy. China is the world's largest importer of oil. And before the pandemic, it was also the largest importer of liquefied natural gas. But demand for oil went down by 2 million barrels a day during the Shanghai lockdowns. One estimate places China's consumption of liquefied natural gas down by 30 percent compared to its long-term average.

This was a largely hidden dynamic pushing down inflation in the past year. China's lower demand released some of the upward pressure on the price of oil, gas, and coal.


But now, if the economy gets back on track this year, China's demand for it could grow by an average of 1 million barrels a day, according to one estimate noted in "The Economist." That could push Brent crude up to over $100 a barrel.

"Bloomberg Economics" estimates that if China is fully opened by mid 2023, energy prices will increase by 20 percent, and the U.S. consumer price index could go from 3.9 percent midyear to 5.7 percent by the end of 2023. That means that the fed and other central banks would likely respond with more interest rate hikes, which many had hoped would call off this year.

Of course, none of this is a foregone conclusion, and much will depend on the nature and the scale of the Chinese economic recovery. But it's an important reminder of just how large a role China plays in the global economy.

Thanks to all of you for being part of my program this year. I will see you next week.