Jonathan Fenby sets out 12 reasons why China feels good:
1. China’s economy is ticking over on a cyclical reflation path with sharp PPI recovery coming through.
2. Though it will get worse in absolute terms, the debt problem has been diffused for now by shifting it away from banks and local governments.
3. Currency outflows have moderated for the time being. The housing sector is heading for a correction not a meltdown.
4. Preparations for the Communist Party Congress in late 2017 seem to be on track with no challenge to Xi as he moves into his second five-year term. Military modernization is going ahead.
5. Trump has pulled back on his initial questioning of the One China policy and his threat to declare the PRC a currency manipulator from day one.
6. China has scored serious points in the South China Sea. The Philippines has tacked towards Beijing, as has Malaysia. Vietnam has agreed to ‘manage’ bilateral differences. Cambodia is in China’s pocket, meaning that the PRC can count on its veto of any hostile moves at ASEAN, where decisions require unanimity.
7. Xi won applause at Davos for his defence of globalisation, even if it is clearly with Chinese characteristics.
8. The passage in Xi’s speech on climate change and continuing the agenda of the Paris conference also struck a chord, especially in Europe.
9. The regional trading pact that China is promoting as an alternative to the now-discarded TPP is winning support.
10. The AIIB is shelling out cash to Southeast Asian countries and the One Belt, One Road programme is moving ahead, notably with Pakistan. China is showing that it can add diplomatic cover by vetoing a UN motion critical of Islamabad.
11. Taiwan has cooled down as a potential flashpoint.
12. By blocking coal imports from North Korea, China has taken the only effective step so far in response to Pyongyang’s missile test and will expect some diplomatic reward.