Yes, it is still a large country in the Far East and is still governed by the Communist Party, but this is a different, centralized party controlled by one man, Xi Jinping, President of the People’s Republic of China. However, if you are wondering whether it is still a country of a rapidly growing economy whose society is opening up, not only in terms of abandoning the zero-covid policy but also in terms of the democratization of society as a whole, the answer is negative.
The economy is stagnating, and society is increasingly struggling with the authority of one-party rule. And if we are to draw a line under all this, Western media are increasingly and more loudly emphasizing that such a China is more dangerous than ever.
A series of problems
The situation in the Chinese real estate sector does not need special description; investors who dared to build entire megacities that stand empty are threatened with bankruptcy. The zero-covid policy paralyzes cities in the third year of the pandemic, one by one. Wherever a significant outbreak of the coronavirus occurs, everything stops, the economy shuts down, and both those who fall ill and those who avoid the virus are in forced confinement, which after almost three years of the pandemic has affected not only the domestic economy but also global economic processes, blocking logistics, transport chains, and the availability of certain raw materials.
This simply means that the world factory has suddenly found fewer customers for its products, both domestically and abroad. Not only that, but global trade that depended on China has found its manufacturers in its backyard or at least nearby (nearshoring). And there are also trade tensions between China and major economies, such as the US and the EU, which are also hindering growth. As if that were not enough, the yuan is plummeting against the US dollar, and the weak currency scares investors, creating uncertainty in financial markets, making it difficult for the central bank to pump money into the economy. And there is another new moment, the strong Chinese military continues to be in the spotlight of global public opinion, especially the Pentagon.
Nodding heads is a thing of the past
The fact that China is a communist country with a rather authoritarian system, camps for dissenters, and a country that does not respect basic human rights, has not overly concerned either American or European companies that have been producing everything that could be produced there for decades at tariffs that cannot be imagined on the Old Continent or in the US.
Cheap labor was enticing enough for investors in itself, and the absence of various environmental and sometimes just common-sense regulations about what those factories are allowed to emit into the environment and what they are not, meant that such companies could forget all Western restrictions and operate and pollute without care or thought, and as if that were not enough, the transportation of that produced goods from China was literally at peanuts prices.
In such circumstances, freedoms, government oversight, and even intellectual property theft were not overly concerning to anyone; when everything else passes, you deal with it by pretending not to see it. However, the transformation of China from an incomprehensible country ruled by some oddballs who just nod their heads and say yes, yes, is now over. Namely, now those yes, yes oddballs are asking for favors in return, asking that Chinese investors be as welcome in China as Western ones in the US and the EU.
America immediately slammed the door and said it wouldn’t be able to do it tonight, while Europe still cannot decide whether to strictly prohibit their investments and arrival in the EU or to open the doors wide for them. Just a few days ago, there was lamenting in Hamburg about whether Chinese Cosco would get permission to take a stake in the largest German port, but the government ultimately gave the green light… After all, even our most beautiful bridge, which we are prouder of than ever, was built by a Chinese company.
The economy is in decline
However, even all these desires for investments in the Western world do not mean that Chinese power is strengthening worldwide; quite the opposite. Ambitions exist, but strength does not, which, analysts believe, makes that country more dangerous than ever. Perhaps the best proof of this is how much Beijing has tried to hide the fact that their economy has slowed down.
Last week, during the Communist Party Congress, a gathering held every five years where the leadership of the CPC is changed, the publication of the report on Chinese GDP and other economic data was postponed and then published after the Congress without warning. And the numbers were bad, only 3.9 percent GDP growth in a year when policymakers projected growth of 5.5 percent. But that is not even the worst part. Beijing is slowly but surely reducing the transparency of economic data, which worries both current and future investors who do not know what is happening in the country where they operate.
What is known is that domestic consumption has fallen, the youth unemployment rate is around 18 percent, and currently, the only thing holding the economy is exports.
In addition to short-term signs of problems, there are more permanent signs indicating China’s economic troubles. The most visible is the slow decline of the real estate market in the country. Moody’s estimates that between 70 to 80 percent of Chinese wealth is tied to property, and the real estate sector accounts for about 30 percent of GDP. In times of economic difficulties, central and local authorities have always relied on property to stimulate growth regardless of demand. As a result, about 20 percent of properties in China, which amounts to about 65 million units, stand empty, and investors are drowning in debt.
However, stopping construction would mean economic disaster. Since the beginning of this year, more than 40 development companies have gone bankrupt in that country, and the government is trying to contain the chaos by distributing losses to local governments and bank balances across the country.
Xi, on the other hand, believes he has a solution to all these problems; he wants the Chinese economy to be based on domestic consumer spending, not to depend on huge infrastructure projects either domestically or abroad, and especially does not want it to grow on the export of iron and mobile phone screens. His vision is for China to be a technologically advanced country with high-value products and services to offer to the world, and that the world should buy it because it is both high quality and reasonably priced.
However, the world is not cooperating. Neither the US nor many EU countries want semiconductors from Chinese state companies, nor Chinese mobile phones, nor Chinese electric autonomous vehicles, and China interprets this as the West doing everything to prevent Beijing from becoming a self-sustaining technological superpower. And that could make a country with a strong military, which does not bluff about supporting Putin, quite dangerous.
