China’s economy risks being the big loser
President Xi’s government faces intense challenges in this new era of strategic competition
Self-inflicted wounds threaten to rip the heart out of China’s economy.
Bungled Covid-19 policies, banking scandals and a property crisis have shattered the myth of competency and stability, the cornerstones of the ruling Communist Party’s legitimacy.
Soaring unemployment among the young and anemic consumer confidence have simply added to the risks.
In short, Beijing faces economic peril if globalization fractures in the months and years ahead.
“For more than three decades, the global economy was defined by unbridled integration and unprecedented interdependence,” George Magnus, of the China Centre at Oxford University, said.
“Neither political spats nor localized wars could slow the globalization train. Markets were markets, business was business, and multinational firms became more multinational,” he wrote in a commentary for The Wire China.
“Not anymore. In this new era of strategic competition between China and the West, disengagement is the order of the day. While this trend will impede economic growth for everyone, the economy that loses the most may well be China’s,” Magnus, an independent economist and commentator, pointed out.
Between the lines:
- Official data released earlier this month showed China’s economy shrunk 2.6% in the second quarter from the first three months.
- Flash lockdowns in major cities such as Shanghai, weak consumer spending and trade turmoil stalled economic activity.
- Unemployment also surged among the 16 to 24 age group, hitting a record 19.3%.
- Nearly one in five young people is now out of work.
- Even China’s trade figures in June failed to lift the gloom.
What if the new era of great-power competition was over before it had even begun.
Craig Singleton, of the Foundation for Defense of Democracies
Lesson from history: “The People’s Republic would not be where it is today without globalization. International trade, investment, and capital-market access drove economic growth, while knowledge transfer – aided by engagement among students, scientists, and scholars – enabled technological leveling-up,” Magnus, of Oxford University, said.
Lesson from today: “Government trade data confirm that exports continue to keep #China afloat & domestic consumption continues to be mind-numbingly weak. So let’s be done [with] all the China weakness foreshadows developed world pain commentaries. China is dependent on [the world] for growth, not [the] other way around,” China Beige Book, the research consultancy, tweeted.
Big picture: So, what does this mean for the China Century and President Xi Jinping’s dream of global dominance? The tea leaves appear to be increasingly cloudy.
Stirred and shaken: “What if the new era of great-power competition was over before it had even begun,” Craig Singleton at the Foundation for Defense of Democracies asked.
Dated data: “Many of today’s fears about a multi-generation conflict with Beijing rest on linear extrapolations of yesteryear’s data, harkening back to a time when China appeared on track to supplant the United States as the world’s largest economy,” he wrote in a commentary for Foreign Policy.
China Factor comment: Another warning sign of impending gloom is runaway youth unemployment. Party cadres are well aware of the role it played in the Arab Spring or Color Revolutions as they are known in Chinese government circles.