For several years, experts have warned about Cinema growth and potential dominance in international politics in the coming decades.
Since he came to power in 2012, China’s leader Xi Jinping has tried to portray China as an important trading partner for all countries that want to grow in the 21st century. “The rise of the East and the decline of the West” has been one of his famous quotes.
However, the latest growth and trade figures show a different future for China, and Beijing’s march towards global economic hegemony may not be as rapid and dominant as many in the West have feared.
Deflation and decline in exports
For the first time since February 2021, consumer prices are falling.
Statistics, which were published on Wednesday, show that the consumer price index in China has fallen by 0.3 per cent on an annual basis in July. The producer price index – which measures the prices of goods as they leave the factory – fell by 4.4 per cent in July.
The article continues below the advertisementThe article continues below the advertisement
This means that China’s economy has fallen into deflation and is a reflection of lower purchasing power and weak consumer confidence, writes Financial Times (FT). Deflation is the opposite of inflation, and means that the prices of goods and services fall over time.
At the same time, China has experienced a decline in the real estate sector, and weak trade figures, which also contribute to slowing economic progress.
On Tuesday this week, statistics were published showing that exports in July fell by 14.5 per cent on an annual basis, which is the steepest fall since the pandemic started. Imports have fallen by 12.4 per cent on an annual basis measured in dollars, the biggest drop since January.
In the three years that China was closed to the outside world, Chinese exports have helped to keep the economy up. In 2023, however, high global inflation and rising interest rates in many countries have dampened demand for Chinese goods.
The article continues below the ad
Now the pressure is increasing on the Chinese authorities for measures that help speed up the Chinese economy.
(The article continues below the picture).
Aerial photo from July 17, 2023, shows buildings in Shenyang in northeast China. Latest forecasts show weak figures for China’s economy. Photo: AFP / China OUT
– The Chinese economy is now in serious danger of slipping into deflation which could trigger a self-reinforcing downward spiral in private sector growth and confidence, says Eswar Prasad, China expert at Cornell University, to FT.
– The authorities must act quickly and decisively to stabilize growth and limit deflation before the situation gets out of control.
According to FT Chinese policymakers have sought to show confidence in the economy following the reopening of society from the pandemic, by lowering some interest rates and offering tax incentives to businesses.
But they have not been in favor of big stimulus to get the economy going.
However, the Chinese Communist Party’s Politburo admitted at the end of last month that the recovery was “slowing down”, and said it would “actively increase domestic demand”, writes FT.
The article continues below the ad
High unemployment and declining population
Not enough with deflation and poor trade figures. Unemployment among young people is also increasing dramatically.
In the age group 15-24 from urban areas, unemployment is up to 21.3 percent in June writes The New York Times (NOW).
The figures for July are expected to be even higher, as the next wave of graduates this month officially transitions from being students to becoming job seekers. The NYT writes that this will intensify one of the most demanding challenges facing China, and which will prevent the economy from regaining vitality.
“If it is not handled properly, it will lead to other social problems beyond the economy. It can even lead to political problems”, says a report from the think tank China Macroeconomy Forum, writes the NYT.
According to the NYT, the high unemployment is due, among other things, to a mismatch between the jobs people want and those available.
The article continues below the ad
Today, there is a much larger proportion of young Chinese who take higher education and want jobs in well-paid sectors than 20 years ago. This year, it is estimated that 11.6 million students will graduate from universities. In 1992, this figure was 754,000, writes the NYT.
This is reflected in the job market, where the majority of those who graduate want to work in sectors such as technology, finance and property, rather than in industry.
At the same time, there is less supply of this type of work in China, partly because several private entrepreneurs increasingly fear that the state will interfere in the business, and have therefore cut back or moved their business out of the country.
(The article continues below the picture).
Young Chinese university graduates at a job fair in Yibin, in China’s southwest Sichuan province. Unemployment among Chinese youth rose to 21.3 percent in July, 2023. Photo: CNS / AFP) / China OUT
Under Xi’s leadership, the Chinese bureaucracy has introduced strict regulations for several large technology companies, including the e-commerce company Alibaba.
The article continues below the ad
In addition, the property sector is experiencing a large decrease in demand and development. This sector has previously been China’s engine for growth and welfare.
A final decisive factor for China’s economy in a longer perspective is the country’s declining population.
According to a report from the consulting company Terry Group over the next decade, China will lose an average of 7 million working-age adults each year, which will increase to 12 million a year in the 2050s.
The consultancy claims that this will have a direct impact on the country’s ability to compete with the US and other nations worldwide because the large-scale population decline has such a negative impact on the economy.
China and Europe
Both the US and European states are now in a process of reassessing their own economic vulnerability, and dependence on supply chains controlled by potentially unfriendly regimes.
The article continues below the ad
Western leaders now routinely talk about economic “de-risking” from China.
Recently, the news came that US President Joe Biden is limiting, or almost banning, certain types of US investment in Chinese technology companies that develop microchips and artificial intelligence.
Italy’s prime minister, Giorgia Meloni, is also preparing to withdraw from an agreement that means Rome will become part of Xi’s global infrastructure plan.
President Joe Biden in a video call with Chinese President Xi Jinping last November, where Russia’s invasion of Ukraine was the central topic. Photo: Susan Walsh / AP
All these factors are signs that China will not necessarily dominate the world economy in the coming century, as many had predicted. At the same time, this suggests that China may not be as powerful as many in the West fear.
On the other hand, a poor Chinese economy will also have negative consequences for the global economy, as a large part of the world’s jobs and productions depend on China.
The article continues below the ad
Economic and internal problems in China could also worsen the geopolitical situation between the world’s great powers.
Joe Biden recently stated that China is like a ticking time bomb.
– They have had some problems. It’s not good, because when bad people get into trouble, they do bad things, Biden said during a visit to Salt Lake City in the state of Utah on Wednesday, writes NTB.
For now, it is unclear whether Xi will show a more friendly side, or whether tougher economic times in China will instead encourage more conflict to divert public opinion and bolster nationalist sentiment.
2023-08-13 06:04:24
#Chinas #economy #deteriorating #trigger #selfreinforcing #downward #spiral
