China: economy, government, governance

Written by  //  June 4, 2024  //  China, Economy  //  Comments Off on China: economy, government, governance

The Backstory: The Rise of China
(Foreign Affairs) The debate over how to approach China rages on in Washington. The Biden administration has imposed waves of trade restrictions on Beijing and moved to strengthen relationships with key allies in the Indo-Pacific, including Japan and the Philippines. But policymakers on the right are calling for an even tougher approach. “A cold war is already being waged against the United States by China’s leaders,” write former Deputy National Security Adviser Matt Pottinger and U.S. Representative Mike Gallagher in a new essay for Foreign Affairs. “Rather than denying the existence of this struggle, Washington should own it and win it.” Even those who argue that the United States should do more to accommodate China can agree: Washington cannot afford to look away from Beijing.
This wasn’t always the case. Writing in 1993, the journalist Nicholas Kristof noted that the only group paying close attention to China’s trajectory was the business community. Meanwhile, he wrote, policymakers were “not giving adequate consideration to the colossal implications—economic, political, environmental and even military—of the rise of a powerful China.” (November/December 1993)

China’s crackdown on Tiananmen memorials shows its obsession with security – and growing paranoia
Louisa Lim
Under Xi Jinping, national security has swallowed up all other state policies, and Hong Kong’s activists are paying the price
(The Guardian) Thirty-five years have passed since the People’s Liberation Army opened fire on the Chinese people, yet Beijing seems more determined than ever to suppress acts commemorating the deaths of 4 June – even small ones far beyond China’s own borders. Such repression appears irrational: its targets are not influential political figures, their actions are limited in reach and the acts of suppression affect basic freedoms in other countries far from China. Yet it is illustrative of the sea change at the heart of Xi Jinping’s China. The man dubbed “the chairman of everything” is transforming China into a security state whose top priority is the securitisation of everything, all the way down to the individual.
National security now lies at the heart of Xi’s governance, or, as he puts it, is “the bedrock of national rejuvenation”. In the eyes of China’s Communist party, national security now encompasses 20 different sectors including food security, cybersecurity, ecological security and polar security. The expanding purview of national security has effectively swallowed up all other policy areas.
Heavy security in China, Hong Kong to mark 35th anniversary of Tiananmen crackdown
(NPR) Checkpoints and rows of police vehicles lined a major road leading to Beijing’s Tiananmen Square on Tuesday as China heightened security on the 35th anniversary of a bloody crackdown on pro-democracy protests.
China has long quashed any memory of the killings, when the Chinese government ordered in the army to end the months-long protests and uphold Communist rule. An estimated 180,000 troops and armed police rolled in with tanks and armored vehicles, and fired into crowds as they pushed toward Tiananmen Square.
The death toll remains unknown to this day. Hundreds, if not thousands are believed to have been killed in an operation that started the night before and ended on the morning of June 4, 1989.
Tiananmen memorials have also been scrubbed out in Hong Kong — for years the only place in China where they could take place. On Tuesday, a carnival organized by pro-Beijing groups was held in a park that for decades was the site of a huge candlelight vigil marking the anniversary.
Police used a new national security law to arrest eight people over the past week for social media posts commemorating the crackdown, including Chow Hang-tung, a former organizer of the vigil. Several pro-democracy activists told The Associated Press that police had inquired about their plans for Tuesday.

20 March
China’s economic slowdown is dragging down the rest of the world
Ian Bremmer asked economist and author Dambisa Moyo to grade the health of the global economy amid ongoing geopolitical crises and Europe and the Middle East, stalled Covid recovery, and a major economic slowdown in China. Her answer is more optimistic than you might expect, given so much uncertainty and volatility around the world. It’s true that the US economy has shown surprising resiliency, which is why the world avoided a global recession in 2023.
But China’s economic slowdown is still a significant drag on the overall global outlook. Structural issues within the Chinese economy–a collapsing real estate sector, high levels of local government debt, the flight of foreign investment–have a major impact on the world’s finances because of China’s role as the largest foreign direct investor to the developing world, as well many developed economies. But so far, the policy response from the central government has been relatively slow and piecemeal compared to expectations.
So China’s four decades of double-digit GDP growth over? And how do rising tensions between China and the West, mostly led by the US, impact that trajectory?

21 February
Red Sea crisis sees China’s brisk business in Africa waver under high shipping costs amid Houthi attacks
China has particular exposure to Africa, with investments reaching rising by 4.4 per cent to US$1.8 billion in the first half of 2023

26 January
Next China: Stock Market Meltdown
(Bloomberg) The new year has seen anxiety over China’s slowing economy flare spectacularly in its giant stock market, with Shanghai dethroned as Asia’s biggest equity market and Hong Kong, briefly overtaken by India as the world’s fourth-biggest bourse.
In all, three straight years of losses have wiped more than $6 trillion from the market value of Chinese and Hong Kong equities since a peak reached in 2021. … China’s equity market has more than 200 million retail investors, many of whom have traditionally looked to stocks and the property market as ways to grow their money amid rock-bottom savings rates — only to find their wealth shrinking from both.
That in turn is slamming consumer confidence and dragging significantly on the world’s second-biggest economy, a key engine for global growth.

17 January
China’s rulers reckon with troubling ‘headwinds’
China at Davos
(WaPo WorldView) Six years ago, Chinese President Xi Jinping made his last trip to Davos, Switzerland, to attend the annual conclave of global elites up in the mountains. The speech he delivered then to the gathered dignitaries and jet-setters at the World Economic Forum was striking for two reasons. …
This week offers a reminder of what has and has not changed. Trump’s emphatic victory in the Iowa caucuses underscored how large his shadow will loom over the United States and the world in the months to come. In Davos, a major delegation from China unnerved U.S. counterparts. Chinese Premier Li Qiang used his Tuesday plenary address to preach Beijing’s commitments to international comity and prosperity, stressing the need to keep global supply chains “stable and smooth.”
But now China’s position on the world stage is markedly different. Xi’s ruthless quashing of Hong Kong’s political freedoms focused attention on the intensifying authoritarian character of his regime. Thanks in part to Trump, it’s also become more commonplace for politicians in the West to sour on the entire project of globalization and specifically lament the ways in which Beijing manipulated the rules of the road to its advantage.

2023

Did Authoritarianism Cause China’s Economic Crisis?
(New Yorker) An erosion of trust between the government and its people now threatens the country’s decades-long boom.
China’s economy, the world’s second largest, is facing its most serious setback in a generation. During the past two years, economic growth appears to have been cut nearly in half. After emerging from the “zero COVID” policies that Xi Jinping, China’s leader, ordered early in the pandemic, the country now faces a real-estate crisis and faltering confidence from both its own citizens and overseas businesses. The problems have sparked debate among economists about whether Xi’s increasingly autocratic regime is to blame, and what a major slowdown could mean for the rest of the world.
To talk about China’s economy and the possible causes of its malaise, I recently spoke by phone with the economist Eswar Prasad: a professor at Cornell University and a senior fellow at the Brookings Institution, an expert on the Chinese economy, and the author of “The Future of Money.” During our conversation, which has been edited for length and clarity, we discussed why Xi may be hesitant to implement significant economic reforms, how serious a threat a crashing Chinese economy is to the rest of the world, and the lasting impact of China’s pandemic policies. (7 September 2023)

6 December
Ian Bremmer: The dismal state of global affairs
China’s economic challenges
The China “growth engine” no longer works the way it used to.
Youth unemployment stands at record highs. Manufacturing activity is contracting. The property sector is in serious trouble. Exports have declined on the back of inflation and historically high interest rates in the US and Europe. Foreign investment into China has turned negative for the first time since we’ve measured it. Property prices are declining, household wealth is contracting, and borrowers are no longer willing to underwrite property construction. Developers and lenders are defaulting. Revenues for local governments are drying up just as their debt servicing costs are rising. Domestic demand is stagnant, consumer sentiment is down, and growth is slowing.
China’s government response has been limited and incremental. Large-scale bailouts for distressed developers, shadow banks, and local governments are off the table for now. Headline growth may well come in at 5% this year, but the economy faces deflation caused by persistently weak consumer spending, slowing private investment, overcapacity, and mounting financial stress. The IMF now expects the Chinese economy to grow under 4% a year for the coming years; absent reform, this number could go lower, especially in light of unfavorable demographics, chronically high debt, and intensifying geopolitical competition with the US and its allies.
For the first time since the 1980s, the Chinese people fear that the next generation will not be better off than the present one. And the increasingly centralized, opaque, and capricious nature of Chinese policymaking – not to mention a series of disruptive policies such as tech crackdowns, the zero-COVID lockdowns and abrupt exit from them, and raids on foreign firms – has undermined the public’s confidence in Beijing’s ability to fix the problem.
The good news is that China remains a highly competitive economy, with an educated workforce, increasingly world-class infrastructure, and advantages in manufacturing, renewable energy, and electric vehicles as well as leading-edge innovation in frontier industries like advanced computing, AI, and biotechnology. China is also very politically stable, allowing President Xi Jinping to avoid the temptation to revert to unsustainable debt-fueled growth if he chooses. Only a systemic financial contagion or mass protests, neither of which looks likely in 2024, could force his hand. Instead, he will simply add stimulus at the margins and call on his people to persevere as they attempt to shift toward new drivers of growth.
The bad news is this means that Chinese growth is going to remain slower for longer, dragging down global growth with it. And the wrong policy choices could still leave China’s economy in a scenario of prolonged deflation, stagnant growth, and high indebtedness – much like what Japan experienced in the 1990s, but at a much lower level of development. That would be a massive problem for the world given China’s outsize role in the global economy.

3 November
Peak China: Why do China’s growth projections differ so much?
(Brookings) The expected summit between Presidents Joe Biden and Xi Jinping in San Francisco in November will feature an unusual backdrop: a Chinese economy in trouble and a U.S. economy that’s surprisingly resilient. But are China’s problems merely a slump, or signs of lasting decline? A wave of publications has already emerged on “Peak China” (here, here, and here) predicting that China will never overtake U.S. GDP, and may even stop growing altogether.
The inner workings of long-term projections are often obscure, but Roland Rajan and Alyssa Leng of the Lowy Institute offer a professional roadmap and help narrow the range of uncertainty. They start with a growth-accounting model for China with a 6% growth rate for real GDP, the pre-pandemic average, and then carefully estimate changes in the determinants of China’s growth in the years ahead.

2 November
Unraveling Xi Jinping’s call for ‘struggle’
(Brookings) As Beijing faces intensifying geostrategic headwinds and scrutiny of its great power ambitions, the concept of “douzheng”—which translates to both “struggle” and “fight” in English—has resurfaced in Chinese strategic discourse. “Struggling” has become a cornerstone of President Xi Jinping’s vision for achieving China’s “great rejuvenation” and was recently enshrined in the Chinese Communist Party constitution at the 20th Party Congress. The need to “struggle for a new era” has been invoked in numerous contexts, from campaigns to combat internal corruption to calls for Beijing to assert its interests abroad more forcefully.
… Beijing’s heightened sensitivity to perceived attacks on its core interests indeed raises the risk of conflict and necessitates greater vigilance by the United States and its allies to prevent escalation and manage crises with China. But Xi’s call for the party not just to “dare to struggle” but to “be good at struggling” also suggests that Beijing remains a rational actor that can assess its risks and shortcomings — that is, an actor that can be deterred.
In addition, simply reducing Xi’s douzheng to a directive for belligerence misses the larger picture. Douzheng embodies modern China’s aspirations and anxieties; it is an appeal to the Chinese people not to become complacent or to lose hope as difficulties mount at home and abroad, and to proactively work for the country’s “great rejuvenation.”

27 October
China’s Ex-Premier Li Keqiang, a Reformer Sidelined by Xi, Dies
Death comes months after he retired as nation’s No. 2 official
His decade steering economy overshadowed by Xi’s rising power

25 October
China takes on a trillion yuan debt
(GZERO) On Tuesday, China approved a 1 trillion yuan ($167 billion) increase in sovereign debt in a rare midyear budget reassessment as sluggish growth and local governments’ lopsided balance sheets pose major challenges for Beijing.
Half the money will be spent before the end of 2023, mostly on infrastructure projects related to flood mitigation and drainage. That might seem highly specific, and not necessarily the kind of investment that spurs economic growth, but it advances both the political and economic interests of Chinese President Xi Jinping, according to Lauren Gloudeman, Eurasia Group’s director for China.
Flooding hit China hard this year, particularly in the northeast, and cash-strapped local governments were on the hook for the damage, aggravating their extensive debt problems. The damage to agriculture also jeopardized China’s food security — a red line for Beijing — leading Xi to chair a Politburo Standing Committee meeting in August on flood control and reconstruction.
While the debt issuance is likely to help Beijing meet its growth targets, Gloudeman said the decision is not oriented toward kick-starting the economy per se.

24 October
China’s Demographic Achilles’ Heel
Yi Fuxian
American and Chinese policymakers have grown increasingly convinced that China will eventually overtake the US as the world’s largest economy, fueling expectations of an inevitable clash between the two rival powers. But these predictions fail to account for China’s rapidly aging population.

20 October
The political factors behind China’s disappearing leaders
By Mark Parker Young
(Atlantic Council) Chinese Communist Party (CCP) General Secretary Xi Jinping has shaken China’s military and foreign affairs establishments in the past two months by abruptly replacing several senior military officers and China’s minister of foreign affairs. The removals were all the more surprising because Xi had promoted many of these same officials to lead their organizations less than a year earlier. A close look at the officials involved suggests that a variety of personal and institutional factors contributed to their downfall, but the disruptive impact of the sudden disappearances indicates underlying mistakes and misjudgments on the part of Xi and the personnel apparatus he oversees.
The recent removals suggest that Xi has approved prosecutions of several discrete pockets of corruption and misconduct rather than a repeat of the sweeping and interconnected purges of his first term. The senior officials involved had crucial roles within their respective military and civilian bureaucracies, but none was part of Xi’s core apparatus of political control.

8 October
Has the Chinese economy hit the wall?
(East Asia Forum) After a strong start to 2023, Chinese economic activity has sharply fallen short of expectations. Exports have collapsed. Consumption, production and investment have slowed, while inflation levelled out and the unemployment rate edged up. The Chinese renminbi hit new lows in August and September 2023, driven by worries about the domestic economy.
… As always, there are cyclical and structural factors at play in the unfolding economic outlook. Among the cyclical factors are scars from the COVID-19 pandemic — deteriorating balance sheets, an ailing property sector and a limited macroeconomic policy response. Meanwhile, structural pressures are weighing on confidence as regulatory, security and political stability concerns continue to mount.
… There are also structural pressures on Chinese growth. Not least among them are regulatory actions that severely dampened business confidence, especially among technology companies and foreign-invested enterprises.
Some of these policies were implemented to address national security concerns, while others were attempts to deal with legitimate regulatory problems, such as consumer protection and fair competition. They reflect the increasing weight the government assigns to security issues and the costs it is willing to bear as a result.
The government has moved to offset some of these negative policy impacts. As a part of its broader policy mix, it has announced new policies aimed to shore up confidence and support private enterprise, foreign-invested firms and consumption. The government’s 31-point plan released in July 2023 highlights the importance of the private sector and fair competition, eliminating barriers to entry, protecting property rights and drawing private enterprises into national projects.
But the changing geopolitical environment weighs down on the economy. Both China and the United States are attaching growing importance to concerns about national security that impact trade and investment.
Given that both countries share similar concerns, though not necessarily identical definitions of political stability and national security, cooperation to address the challenges posed by globalisation is possible. Such cooperation first requires more dialogue. Conversation is valuable even — or especially — when the political terrain is rough.
Third parties can also play an important role in stabilising relations. The European Union’s ‘de-risking’ approach, even if just partial decoupling by another name, is a helpful example. In Asia, particularly with ASEAN, regional relations can play a stabilising role.

24 September
China’s big belt and road plans for Southeast Asia hit a 10-year speed bump as ‘political side effects’ mount (paywall)
Though belt and road projects have brought economic benefits, fears are growing that the gains will prove to be ‘marginal’ amid growing debt risks
Demand for infrastructure spending isn’t going away, analysts say – but the days of ‘paying lip service’ to local concerns in the region may be over

(SCMP) A decade on from its launch, China’s Belt and Road Initiative has not been the “transformational game changer” many in Southeast Asia were hoping for, analysts say, amid growing concerns over the “marginal dividends” and “political side effects” of engaging with Beijing’s multibillion-dollar connectivity push to grow global trade.
Chinese investments and construction contracts in the region – spanning Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, Cambodia, Laos, and Myanmar – peaked at around US$31.8 billion in 2018, a Maybank report released in March found.
Some of the better-known projects are a 1,035km high-speed railway in Laos that opened in 2021, the soon-to-open 142km Bandung-Jakarta high-speed railway in Indonesia and the 665km East Coast Rail Link project in Malaysia that is still under construction.

20 September
Xi’s Purge of Handpicked Ministers Shatters Stability Image
Chinese leader has ousted top officials with no explanation
Abrupt personnel moves have spooked investors and governments
(Bloomberg) After President Xi Jinping tore up the Communist Party rulebook to promote key loyalists last year, some observers expected his new team to operate more smoothly in tackling China’s biggest challenges.
Instead, his government looks like it’s in disarray. Xi’s mysterious purge of his foreign minister in July, followed by the reported ouster of his defense chief less than two months later, is making China appear unstable to the outside world. The Chinese leader also overhauled the generals overseeing China’s Rocket Force, which manages the nation’s nuclear arsenal, without giving an explanation.
While most analysts don’t see any threat to Xi, who has amassed more power than any leader since Mao Zedong, questions are being raised about his management style. Morale within the Foreign Ministry in particular is very low, with anxiety running high among a group of bureaucrats that see themselves as professional diplomats who don’t want to get caught up in political power plays, according to Chinese officials who asked not to be identified discussing sensitive information.
The upheaval is leaving investors and governments spooked, as outsiders try to piece together Xi’s motives from a slim trail of clues. It’s also undercutting Beijing’s efforts to convince the private sector it’s safe to invest in China, after years of bruising crackdowns on sectors including tech and education. Health-care tycoons have lost some $17 billion in Xi’s latest sweeping anti-graft campaign.
… Persistent tensions with the West — coupled with China’s economic slowdown — have sparked a $188 billion exodus from Chinese stocks and bonds from a December-2021 peak through the end of June this year.

15 September
China’s economy shows signs of stabilising but property slump threatens outlook

  • Industrial output, consumption indicators show improvement
  • Property investment tumbles, private investment shrinks
  • Real estate sector remains major drag on economic revival
  • Analysts see more policy support to sustain growth momentum

(Reuters) – China’s factory output and retail sales grew at a faster pace in August, but tumbling investment in the crisis-hit property sector threatens to undercut a flurry of support steps that are showing signs of stabilising parts of the wobbly economy.
Chinese policymakers face a daunting task in trying to revive growth after a brief post-COVID bounce in the wake of persistent weakness in the crucial property industry, a faltering currency and weak global demand for its manufactured goods.

8-24 August
Why China’s economy won’t be fixed
(The Economist) Our leader argues that things are very bad indeed. The blame lies with Xi Jinping and China’s increasingly autocratic government. Mr Xi’s centralisation of power and his replacement of technocrats with loyalists is leading to damaging policy failures, not least a feeble response to tumbling growth and inflation. This week my colleagues provide detailed coverage on the consequences inside China and for the rest of the world.
In the 2000s Western leaders mistakenly believed that trade, markets and growth would boost democracy and individual liberty. But China is now testing the reverse relationship: whether more autocracy damages the economy. The evidence is mounting that it does—and that after four decades of fast growth, China is entering a period of disappointment.

Paul Krugman: How Will a Chinese Financial Crisis Impact the World?
in economic terms, we seem to be looking at a potential crisis within China, not a 2008-style global event.
I’m not confident enough in my understanding of China to judge whether it will manage to contain its Minsky moment, the point at which everyone suddenly realizes that unsustainable debt is, in fact, unsustainable. In fact, I’m not sure if anyone — including Chinese officials — knows the answer to that question.
But I think we can answer a more conditional question: If China does have a 2008-style crisis, will it spill over in a major way to the rest of the world, the United States in particular? And there the answer is pretty clearly no. Big as China’s economy is, America has remarkably little financial or trade exposure to China’s problems.
Before I get there, let’s talk about why China in 2023 resembles the North Atlantic economies, both America and Europe, in 2008.
The 2008 crisis was brought on by the bursting of a huge, trans-Atlantic housing bubble. The effects of the burst bubble were magnified by financial disruption, especially the collapse of “shadow banks” — institutions that acted like banks, created the risk of what amounted to bank runs, but were both largely unregulated and lacking the safety net provided to conventional banks.
Now comes China, with a real estate sector even more swollen than those of Western nations in the run-up to 2008. China also has a large, highly troubled shadow-banking sector. And it has some unique problems, notably huge debts owed by local governments.
The good news is that China isn’t like Argentina or Greece, nations that owed large sums to foreign creditors. The debt in question here is, in essence, money China owes to itself. And it should in principle be possible for the national government to resolve the crisis through some combination of bailouts of debtors and haircuts for creditors.
But is China’s government competent enough to manage the kind of financial restructuring its economy needs? Do officials have sufficient resolve or intellectual clarity to do what needs to be done?
I worry especially about that last point. China needs to replace unsustainable real estate investment with higher consumer demand. But some reporting suggests that top officials remain suspicious of “wasteful” consumer spending and also balk at the idea of “empowering individuals to make more decisions over how they spend their money.” And it’s not reassuring that Chinese officials are responding to the potential crisis by pushing banks to lend more, basically continuing along the path that got China where it is.
So China may have a crisis. If it does, how will it affect us?
The answer, as far as I can tell, is that America’s exposure to a potential China crisis is surprisingly small.

Evergrande files for US bankruptcy protection as China economic fears mount
(Reuters) – Embattled developer China Evergrande Group (3333.HK) has filed for U.S. bankruptcy protection as part of one of the world’s biggest debt restructurings, as anxiety grows over China’s worsening property crisis and its impact on the weakening economy.
China unexpectedly lowered several key interest rates earlier this week in a bid to shore up struggling activity and is expected to cut prime loan rates on Monday, but analysts say moves so far have been too little, too late, with much more forceful measures needed to stem the economy’s downward spiral.

How serious is China’s economic slowdown?
Nicholas R. Lardy, Peterson Institute for International Economics (PIIE)
A new consensus has emerged among many economists, journalists, and other analysts regarding the current slowdown in the Chinese economy. Their contention is that China’s stumbles in spring 2023 portend a far more serious long-term problem derived from flawed, insular, and Communist Party-controlled policymaking in response to COVID and its aftermath, with likely adverse consequences for the global economy.
… But a careful reading of the present situation does not support the view that China’s growth is now gripped by a severe cyclical downward spiral that will persist for several years.

China’s economy in trouble
(GZERO) China’s economy has averaged about 10% annual growth year over year for the past four decades. It’s undoubtedly the biggest economic success story of our lifetime, but how long can that last?
Shaun Rein, founder and managing director of the Shanghai-based China Market Research Group, sits down with Ian Bremmer on GZERO World to talk China’s post-COVID recovery, Xi’s crackdown on the private sector, and why the last year has turned him from a bull to a bear on China’s economic outlook.
Annual GDP growth has been on a relative decline since 2010, barring a big jump coming out of the pandemic. Decades of infrastructure investment have left local governments drowning in debt. Almost three years of zero-COVID politics ground China’s economy to a halt. Youth unemployment is surging to record highs and expected to keep climbing.
Ian Explains: Why China’s era of high growth is over
Between 1978 and 2017, China averaged almost 10% year-over-year GDP growth. Decades of pro-investment policies transformed China from a closed, centrally-planned economy to an economic powerhouse that could rival the US.
But President Xi Xinping has been moving China away from the pro-investment policies of his predecessors and back to its socialist roots. In recent years, the government has cracked down on everything from technology to finance to entertainment to foreign investment.
At the same time, 3 years of Zero-Covid policies sapped domestic spending and production. Decades of infrastructure investment have left local governments drowning in debt.

China flirts with deflation. Why is that a bad thing?
Times are tough in the world’s second largest economy. After several years of on-and-off-again pandemic lockdowns, China’s economic rebound remains limp. Even the notoriously tight-lipped politburo of the Chinese Communist Party recently nodded to the economy’s “tortuous progress.”
While much of the rest of the world contends with inflationary pressures, many economists say China is tussling with the inverse phenomenon: deflation.
What’s deflation, and what are the implications at home and abroad?
China’s economy, worth a whopping $18 trillion, is a dynamic one, and so multiple factors are contributing to its current anemia.
Beijing’s flirtation with deflation is linked, in large part, to the plunging cost of goods and services due to weak demand at home. Simply put: Chinese consumers are spending less, which is putting downward pressure on prices. A steep dip in imports last month – 12.4% year-on-year – signals that demand remains sluggish six months after President Xi Jinping ditched the growth-stifling zero-COVID policy.

The End of China’s Economic Miracle
How Beijing’s Struggles Could Be an Opportunity for Washington
By Adam S. Posen
Foreign Affairs September/October 2023 Published on August 2, 2023
As 2022 came to an end, hopes were rising that China’s economy—and, consequently, the global economy—was poised for a surge. …
Initially, some parts of China’s economy did indeed grow: pent-up demand for domestic tourism, hospitality, and retail services all made solid contributions to the recovery. Exports grew in the first few months of 2023, and it appeared that even the beleaguered residential real estate market had bottomed out. But by the end of the second quarter, the latest GDP data told a very different story: overall growth was weak and seemingly set on a downward trend. Wary foreign investors and cash-strapped local governments in China chose not to pick up on the initial momentum.
This reversal was more significant than a typical overly optimistic forecast missing the mark. The seriousness of the problem is indicated by the decline of both China’s durable goods consumption and private-sector investment rates to a fraction of their earlier levels, and by Chinese households’ increasing preference for putting more of their savings in bank accounts. Those trends reflect people’s long-term economic decisions in the aggregate, and they strongly suggest that in China, people and companies are increasingly fearful of losing access to their assets and are prioritizing short-term liquidity over investment. That these indicators have not returned to pre-COVID, normal levels—let alone boomed after reopening as they did in the United States and elsewhere—is a sign of deep problems.

July 2023
The future of the Belt & Road Initiative in ASEAN
BRI engagement in ASEAN is recovering and will likely focus on financially and environmentally sustainable projects in the coming years.
(Maybank2u/Singapore) As a key recipient of investment flows from China, ASEAN is likely to see a rebound in Belt and Road Initiative (BRI) projects this year as the Chinese economy re-opens. The quality, focus and size of these investments will be closely watched as China recalibrates its BRI focus towards more environmentally sustainable projects with stronger risk controls.
Year 2023 is shaping up to be an interesting inflexion point for BRI investments in Southeast Asia. As China marks the 10th anniversary of its flagship BRI this year, its investments into top BRI destinations like ASEAN will be closely watched for signs of how it will recalibrate its New Silk Road strategy and redirect its investments in coming years.
Investment and construction investment flows are likely to rise as China fully re-opens its economy and embarks on the next phase of BRI development, with an emphasis on risk control.
“Many ASEAN countries, which largely fit the bill for these principles, could well
become key beneficiaries of China’s shift towards more environmentally and
financially sustainable projects over the longer term,” said Dr Chua Hak Bin, Co-Head, Macro at Maybank Investment Banking Group.
For the [ASEAN] region as a whole, a recovery in Chinese BRI inflows is unlikely to raise engagement to pre-pandemic levels,” said Dr Chua.
One reason is the waning appetite for China’s money. There is growing hesitancy to accept China’s investments as countries grow more wary of its growing power and regional influence, amid territorial disputes in the South China Sea.

14 June
Priority Reforms Key for Sustaining Growth and Achieving China’s long-term goals – World Bank Report
(World Bank) China’s economic activity bounced back in the first quarter of 2023 with the removal of mobility restrictions and a surge in spending on services. However, growth momentum has slowed since April, indicating that China’s recovery remains fragile and dependent on policy support, according to Sustaining Growth through the Recovery and Beyond, the latest China Economic Update released today by the World Bank.
China’s GDP growth is projected to rise to 5.6 percent in 2023, led by a rebound in consumer demand. Capital spending in infrastructure and manufacturing is expected to remain resilient. Meanwhile, external demand is expected to remain soft with weak global growth impacting exports.

17 March
China Is Changing the Way It Governs
(Globely) Chinese President Xi Jinping had only just launched his third term in power when questions about his leadership began to circulate at home and abroad. China’s complete turnaround on its zero-COVID policy was so rapid and extraordinary that it caught almost everyone by surprise.
But China’s course correction was signaled well before policy shifted in December 2022. In February 2022 responsibility for controlling COVID-19 was devolved to local governments, which made China’s shift from “dynamic clearing” or zero-COVID possible. Before the 20th Party Congress, the Yangtze River Delta was slated as the centerpiece of China’s COVID-19 recovery. After the Party Congress, local governments began to loosen restrictions a week before official central word. But the national scale of the reversal was more surprising than the implication that some areas could follow different policies.
Following the zero-COVID turnaround, there was central silence until February, when Xi’s role was portrayed as visionary and the Chinese Communist Party (CCP) united behind the new policy direction. That was more than three months after the decisions were taken, and they were then announced by the health authorities rather than by Xi himself.

5 February
China’s ultra-fast economic recovery
The country’s reopening will boost global growth, perhaps uncomfortably
(Foreign Affairs) China is opening up after three years of strict “zero COVID” policies that dampened growth in the world’s second-largest economy. From punitive lockdowns to supply chain disruptions to a worsening demographic crisis, China’s economic outlook has weakened, even as Chinese officials assert that the country is back in business. But China’s current economic uncertainties are deeply rooted in the country’s unbalanced economic model, Michael Pettis warns (in this piece from October 2022). (How China Trapped Itself The CCP’s Economic Model Has Left It With Only Bad Choices) Having relied on a high-investment, debt-fueled development strategy for decades, China is now in an economic predicament of its own making—and regardless of how Beijing proceeds, Pettis predicts, “Chinese growth will slow sharply, and the way in which it does will have profound consequences for the country, the CCP, and the global economy.”

17 January
China Returns to Davos With Clear Message: We’re Open for Business
Emerging from coronavirus lockdown to a world changed by the war in Ukraine, China sought to convey reassurance about its economic health.

5 January
How China’s reopening will disrupt the world economy
A tale of death, growth and inflation
(The Economist) For the better part of three years—1,016 days to be exact—China will have been closed to the world. …  So when the country opens its borders on January 8th, abandoning the last remnants of its “zero-covid” policy, the renewal of commercial, intellectual and cultural contact will have huge consequences, mostly benign.
But eventually something resembling normality will return. The revival of commercial, intellectual and cultural contact with China should be welcomed. But its post-covid economic recovery will be hugely disruptive for the global economy, pushing up the price of oil, gas and other commodities, stoking inflation and forcing central banks to keep monetary policy tighter for longer.

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