Gloom and doom surround China’s bleak economy

Foreign firms ‘now have very little visibility into the true economic conditions’ inside the country

Welcome to the ninth edition of Between The Lines. This week we look at the state of China’s economy. Yes, it really is tanking. We also focus on Beijing’s “influence campaign” in Latin America and Chinese hackers running rampant in Washington. Let’s get started.

Oh dear, oh dear, oh dear. China’s economy is in free fall. After months of trying to cover it up, the full impact of the slump is setting off alarm bells in the Communist Party’s corridors of power.

Liu Shangxi, the influential head of the Chinese Academy of Fiscal Sciences under the Ministry of Finance, was the latest high-ranking economist to voice his growing concerns in the state-owned China Newsweek. He said:

There were signs of an economic downturn starting from the second quarter of this year. This indicates that risks may be spreading and expanding, and there is little disagreement regarding this assessment.

The situation is dire. Eye-watering government debt of US$23 trillion, a property sector meltdown and surging unemployment among the young have left the economy in tatters. Slumping exports and stagnant factory activity have only added to the toxic mix. 

For multinational companies in the country, the future is bleak. Shehzad Qazi, the managing director of consultancy China Beige Book, picked up the story in the financial media outlet Barron’s this week: 

Foreign firms now have very little visibility into the true economic conditions in China and even companies with which they’re doing business. 

“Beijing forcing foreign firms to fly blind is not just bad for those companies, but bad for China,” he said.

What a surprise. But then, China Factor has been banging on about these issues for years.

China has launched an online campaign in Latin America. Image: File

China’s online United Front in Latin America

Beijing has launched a digital propaganda campaign in Latin America orchestrated by the shadowy United Front Work Department. Reporting to the Central Committee of the Chinese Communist Party, its goal is to gather intelligence and influence public opinion.

An online report on Tuesday by TIME Magazine highlighted data from the American cybersecurity firm Nisos and the role played by state media, such as China News Service:

[These] activities offer a glimpse into an expanding Chinese influence operation in the region, designed to bolster the country’s status as a top regional ally and trading partner.

“With much of Latin America’s online ecosystem largely ignored by the [United States] and social media companies, China has had free rein to ‘experiment with different strategies in the information space’, Sandra Quincoses, an intelligence analyst at Nisos, pointed out.

Remarkably, this has been happening in Washington’s backyard.

Cloudy outlook after Chinese hackers hit Washington. Image; iStock

Washington has its head in the cloud over hackers

Chinese hackers have been accused of targeting the US State Department ahead of Antony Blinken’s long-awaited trip to Beijing last month. Officials told The New York Times that the “breach revealed a significant security gap in Microsoft’s cloud.”

The hack went undetected for a month and comes at a time of heightened diplomatic tension between China and the United States, the NYT reported on Thursday.

Julian Barnes, who covers national security for the New York-based newspaper, said:

The Biden administration is trying to reset relations with Beijing. The US does not want that dialogue to end. So there is an interest in downplaying this.

“Here’s an example where basic security was breached and the information was stolen. That has opened us up to a new avenue of attack: Here is the first big cloud attack on the US government email,” Barnes added.

It appears the Washington elite have their heads too firmly fixed in the clouds.