The CCP’s visions clash with economic realities in China and its trade partners.
Commentary
China’s economy is a tale of competing realities.
The Slowdown Is Real
On the one hand, China faces a drawn-out domestic economic crisis with multiple effects throughout the economy, most of which remain unresolved. A big factor continues to be the real estate sector. Not only have large commercial real estate development firms such as Evergrande gone away, but the residential home market is still at risk. June home prices saw their biggest drop in almost a decade.
Weak consumption and falling demand are typically linked to falling income and negative consumer sentiment, also known as negative consumer confidence, which is prevalent in China at this time. So, too, are high unemployment rates, especially among younger workers, and high levels of local government debt, which is another risk hanging over smaller banks that could threaten the financial sector.
Will a Focus on High Tech, Green Exports Pay Off?
But not all is negative in the Chinese economy. Beijing has put forward a plan for economic renewal. However, unlike after the financial crisis or COVID-19 lockdowns, stimulus checks to families to offset income and liquidity losses don’t seem to be in the cards for China’s middle class. That may not be wise. Not only are incomes shrinking, but an aging population is putting more stress on social services for the growing number of retirees who contribute less productivity. Combined with the high unemployment among the young, the economy is seeing falling productivity from both the young and the old.
Rather than replacing lost income at the family level, Chinese Communist Party (CCP) planners are focusing on strengthening high-tech industries such as renewable energy, artificial intelligence, and chip-making. They’re also seeking to harden supply chains to grow the economy through exports. It’s not a new strategy, but will it be as successful as it has been in the past?
‘Made in China 2025’ Never Went Away
The implications of these competitions extend to China’s high-tech export plans for greater economic development. You may recall the “Made in China 2025” policy announced by CCP leader Xi Jinping in 2015, which called for China to become the high-tech center of the world. The plan was to make the rest of the world dependent on China for high-tech products, with their own technology industrial bases essentially hollowed out. The talk of “Made in China ”was later “abandoned” due to negative reactions from Western trading partners.
The CCP’s Balancing Act Between Growth, Stability, Power
But viewed from a broader and long-term context, the authorities in Beijing certainly know that demographic, global trade, and geopolitical trends don’t bode well for a robust rebound in domestic demand or overall economic growth. This is problematic for the CCP for several reasons. At home, in the near term, as economic conditions continue to stagnate, the risk of unrest grows. Though not widely reported, protests against Xi’s one-man rule are rising as economic conditions decline.
It’s a balancing act for the CCP that—given the added historical caveat that an aggressive foreign policy often results from economic distress at home—will continue to impact the rest of the world.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.