The US cannot help Beijing to stabilize its economy.
The day following Beijing stopped its COVID-free policy. Then, immediately after an interaction with the leaders of both the World Bank and the International Monetary Fund, Li Keqiang, a top official from China’s Chinese Communist Party, told reporters that China would welcome foreign investment and encourage an opening of the institution.
This message was repeated in the words of Chinese Embassy to United States Qin Gang in an article entitled “How China Sees the World,” published in the National Interest on Dec. 27. Qin stated to readers “China’s development means a stronger force for peace, not a growing power poised to ‘break the status quo,’ as some call it.”
The ambassador advised to be aware that “if people choose to see the world from a ‘democracy vs. authoritarianism’ perspective, they will be ushering in a world of division, competition, and conflict” while “if they view the world as a community with a shared future, then openness, cooperation, and win-win outcomes will be the fruits of their choice.”
This call for openness and cooperation is against the stance Chinese President Xi Jinping and his diplomats were displaying just a few two weeks back. What is the reason for such a sudden shift in policy? The answer is easy: The Chinese economy is in serious trouble.
With China’s GDP for 2022 at only 3.2 percent, which is well lower than the forecast 5.5 percent, top financial institutions are changing their predictions to reflect their Chinese economy. Goldman Sachs has pushed back its prediction that China’s GDP would surpass its counterpart in the U.S. until 2035.
According to the Japan Center for Economic Research has previously forecast that China would become a global market leader by 2028 2033 predicts that it won’t happen until some time.
Additional evidence of China’s bleak economic future can be found within the Central Economic Work Conference, which is a conference that summarizes the economic situation in China and establishes the key priorities for the economic effort in 2023.
According to the report, the main challenge facing China’s economy, besides managing the issue of preventing and controlling epidemics along with growth and control, is the deficiency in domestic consumption.
Domestic demand is a mix of the investment and consumption of goods. The main reason for China’s problems is the low level of consumption. From 2018 until 2021, China’s percentage of consumption in the GDP has been stagnant at 55% or less which is significantly less than the US’s consumption that has increased to 80%.
While Xi’s zero COVID strategy and a constant anxiety about infection has led to this decline in consumer spending, the root of the issue lies in the structure of wealth for the Chinese population.
One of China’s most prestigious financial think-tank platforms, called the China Finance 40 Forum Recently published their 2022 Jingshan Report, which revealed that the top 10 percent in people in the Chinese populace’s total wealth amounts to 68% of all wealth The lowest 50% contribute only 6.3 percent of the wealth.
This means that half the population isn’t wealthy enough to pay for anything other than essential necessities, and many are unable to even have this. According to Li Li declared at the National People’s Congress press conference on May 28th, China has “600 million people whose average monthly income is only about 1,000 yuan,” approximately $145.
This problem is exacerbated due to the fact that Li’s figure only includes those with an annual income and are recognized by the government’s system. Many people who live in rural areas don’t have regular incomes, and therefore aren’t included in the amount.
In the face of low demand, China resorts to old methods to boost GDP: investing. The past was when these investments were focused on real estate and infrastructure development. However, with the real-estate industry dwindling and infrastructure growing overloaded, China is now shifting the direction of its investments towards high-tech, digital and emerging energy sectors.
(Washington Examiner):The #US must not help #Beijing stabilize its economy : Just one day after Beijing ended its zero-COVID policy, and immediately following a meeting with leaders of the World Bank and the International .. https://t.co/4L93aGwXR6
— NewsOnePlace.com (@newsoneplace) January 8, 2023
This change will take some time, as well as Western technology, to be implemented. However, the current nature of the relationship between West and China could cause embargoes on essential technologies as well as a halt to foreign capital and capital investment, both of which could seriously hinder China’s progress in high-tech.
China is also dependent on the West to maintain its exports of manufacturing as a sector that earns real money and produces significant profit when compared with investment in real estate and infrastructure.
In the end, China’s current economic slowdown is leaving Xi with no other choice than to once more turn to the market for exports as a sector that is earning real dollars and producing significant profits. Manufacturing exports are the mainstay for the Chinese economy which is the reason why even though domestic demand remains lower, Xi is once again signaling a desire to open China to the world outside following the end of zero-COVID.
The issue that is being asked by those in the U.S. and the rest of the West is whether Xi’s move is something to be embraced. There are those who believe that should there be a chance that the Chinese Communist Party could become more open and accepting the possibility of stabilizing its power might be feasible.
But I’d argue that we need to take lessons from the past and not equate the CCP’s economic reforms and its move to be more open to freedom and democratic rule. It is better to realize that it’s merely an interim solution in the middle of an economic crisis.
Xi is simply repeating what CCP did since before his presidency. This means that when the party is confronted with an issue that it isn’t able to solve or get land tax from, the party offers an act of cooperation and reform in order to win Western support in times of necessity. If China’s economy and society is stabilized it’s position is often reversed.
The leaders in all of the free globe have for a long time ignored the primary motives of the CCP. Even former presidents Richard Nixon and Ronald Reagan decided to concentrate on the possibility that partnering with China could help them successfully confront their rivals in the Soviet Union.
They believed that there was more to it than likely and gave China significant assistance in numerous areas, such as the management of technology, finance as well as defense. The assistance continued to be extended through 1989.
That was when the major democratic movement began to take hold throughout China along with the Chinese people demanding changes in the political system that were promoted through the state in their speeches. Deng Xiaoping, the leader of the CCP at the time, didn’t respond by embracing the idea, however, but by suppressing it which eventually led to the massacre that took place at Tiananmen Square.
Following Tiananmen, China reverted back to a closed-door government for a period. This caused a dramatic economic decline for China and a new crisis for The Chinese Communist Party. Deng was acutely aware of this crisis and realized that it was a drastic time to make changes.
When Deng traveled across the southern part of China back in the year 1992 delivered his audiences a clear message “If China does not practice socialism, does not carry on with ‘reform and opening’ and economic development, does not improve the people’s standard of living, then no matter what direction we go, it will be a dead end.”
Again, Deng’s words touched a chord of hope in the West. President George H.W. Bush immediately lifted sanctions on China and the President Bill Clinton following suit, changing his anti-communist stance and becoming a major proponent of the engagement strategy. It was the rest of history. China was eventually America’s most powerful adversary.
There is little in common with Xi as well as Deng in their motives and motives. Their common goal is to keep Communist Party rule at all cost. It is not surprising that CCP leadership is unanimous on this issue. Despite the inconsistent and random nature of the reforms implemented in China in the last forty years, the reason behind these changes has always been the same : to ensure Communist Party rule.
While the leadership of the party appears to be seeking Western connections, it is important to examine China’s social and economic circumstances and realize the fact that these conversations stem from the need and the crisis. When China’s economic situation gets better and its Communist Party’s control is secure, the strategy is likely to shift rapidly.
We shouldn’t let our American optimism, as well as the expectation that China can become democratic if it is involved in the global economy, to outweigh our understanding of the history-based redirections made by China to its own advantage.
China is currently experiencing another crisis, which is the third in the past 40 years. It could be a more serious risk of a crisis than that faced by Deng because it’s an era when the dividend of growth for the emerging market, which is the urbanization and population dividend is fading away and the structural imbalances in China persist.
Do we need the West to be able to help at once time? No. Let China utilize its own resources as well as its own funds to reform the nation. Let the strength and quality of our institutions determine the positions of China and America around the globe.