The Chinese Economy and their Weak Geopolitical Position

Jayden D'Onofrio - Teen Aspect - June 22nd, 2022
Li Xueren/AP
 

It has been nearly 46 years since the last time the United States jumped China in terms of annual economic growth. Today, Bloomberg predicts the United States to jump the now cracked Chinese economic structure despite intense domestic inflationary climbs, devastating energy prices, and a pending recession, a combination of factors that speak volumes not to the economic well-being of the U.S., but rather the utter disaster China is becoming embroiled into[i]. The president of China, Xi Jinping, is one of the root causes of the economic paralysis plaguing the Chinese economy with the implementation of harsh COVID-19 lockdown policies, destructive regulations on the nation’s technology sector, and feeble attempts to wane the country of its reliance on globally imported commodities. Not only does China’s complete economic fall effect its 1.3 billion citizens, but it will also prove to be devastating to lower-income American’s and standard civilians across the world that are reliant on the world’s second largest economy.


With China expected to reel in only a 2% gain in economic growth this year, the Chinese government is already planning to inject nearly $5 trillion in stimulus to stave off utter ruin[ii]. Just a month ago, it was reported that China’s manufacturing sector suffered a major setback, an issue of the utmost importance as the industry contributes to nearly half of the country’s gross domestic product and about 40% of its employment[iii].


The nation’s ruling party has continued to derive its legitimacy through the economic progress present in recent decades, but with worrying struggles infecting the outlook for the next several years, the Chinese Communist Party (CCP) is seeking to revamp the country’s development for the world’s biggest population and the very survival of the party itself. Authoritarianism is no stranger to the CCP, evident recently by their draconian lockdowns (no, not the type that Republicans claim were occurring in the United States) that continue to be instituted to this day, nearly two years after the most demanding American anti-Covid measures were rolled back. Couple the authoritarian activities of the Chinese government with total economic collapse, and the nation may just face a crisis on a scale not seen in recent decades across the globe. All the while, China is facing geopolitical issues with the autonomy of Hong Kong, the continued persecution of Uyghur minorities, and the nation’s biggest thorn, Taiwan and its very existence in the South China Sea. Not to mention the nation’s upkept relation with Russia, a country that has been all but exiled from the global financial system as a result of its horrific invasion of Ukraine. China has even seemed open to supporting Russia with military hardware in the midst of its disastrous invasion, despite the effects the Chinese economy would face.


The devastating lockdowns consistently being implemented in China have reduced tourism spending, diminished total manufacturing productivity, and sent overall consumer spending into a deflating spiral amidst the global commodity price rises stemming from the Russian-Ukraine war. President Xi’s solution seems rather similar to the policies that brought China to the very crossroads it is at now. Systematic overinvestment into various industries by the Chinese government has plagued the country for decades and yet still, the CCP wishes to once more embark on a tremendous infrastructure spending spree as a “fix” to the trembling economy[iv]. Meanwhile, the lack of a stable response to the COVID-19 pandemic with a successful domestic vaccine has effectively paralyzed the economic status of China.


Any attempt to mediate the Chinese economy by the CCP will likely prove to be extremely tough during the current global climate considering the constant warning signs of a potential global recession, an event that would prove to become nearly inevitable if China does indeed fall into a recession itself.


Due to how interconnected the global financial system is, specifically between China and the United States, Americans would feel the effects of continued Chinese economic instability to a radical degree. During 2020, trade relations between the United States and China amounted to a staggering $615 billion, a number that would quickly diminish in any event of a Chinese recession[v]. The loss of jobs would come quick in such an environment as companies would downsize due to lack of production from overseas manufacturers and rise in prices for various goods.


To the CCP, the most worrying part of an incoming economic catastrophe is the wavering of its power and exploitation of China’s geopolitical status. Through its continued implementation of the belt and road initiative, hopes to deploy more cooperative military bases in foreign nations, and development of the Chinese military, President Xi would like to strangle Taiwan in the coming decades. With economic ruin looming and the United States seemingly undoubtedly backing Taiwan with troops on the ground, China’s hopes to cause Taiwan to capitulate in an efficient manner with overwhelming force seems dim. In any war with the United States, China would likely be strangled from world trade, specifically through the Straits of Malacca. Linking Asia with the Middle East and Europe, the Straits of Malacca transport nearly 20% of global maritime trade and is also the location of where over 70% of China’s petroleum imports flow through[vi]. In addition, about 60% of China’s trade flows go through the Straits of Malacca, all culminating into a massive geopolitical weakness for China.

Map Depicting World Trade Flowing Through the Straits of Malacca via FleetMon Explorer

In an overall view, China is trembling from terrible policy decisions that have consistently been upheld over the last few decades and still believe the very same ideas that got them into this hole will dig them out. To add on, with the recent war in Ukraine, China’s relationship with Russia may further complicate the nation’s economic status in the near future, all but causing certain economic upheaval to other nations across the world. In a long-term aspect, Taiwan may be one of the few countries to gain from a trembling China, despite the fact that the United States may well face tough times themselves. President Xi Jinping and the CCP will always be interesting to watch, and their decisions will heavily influence the future of global economics thanks to the intermingling of world trade.


References [i] Hancock, T. (2022). US Growth Seen Outpacing China’s for First Time Since 1976. Bloomberg.com. Retrieved June 22, 2022, from https://www.bloomberg.com/news/articles/2022-05-20/us-growth-seen-outpacing-china-s-for-first-time-since-1976#xj4y7vzkg [ii] Bloomberg. (2022). China’s Stimulus Tops $5 Trillion as Covid Zero Hits Economy. Bloomberg.com. Retrieved June 22, 2022, from https://www.bloomberg.com/news/articles/2022-05-19/china-s-stimulus-tops-5-trillion-as-covid-zero-batters-economy#xj4y7vzkg [iii] He, L. (2022, May 5). China's economy is going backwards. CNN. Retrieved June 22, 2022, from https://www.cnn.com/2022/05/05/economy/china-economy-services-decline-covid-intl-hnk/index.html [iv] He, L. (2022, April 28). China's XI calls for 'all-out' infrastructure splurge to rescue economy | CNN business. CNN. Retrieved June 22, 2022, from https://www.cnn.com/2022/04/27/economy/china-xi-infrastructure-push-covid-lockdowns-intl-hnk/index.html [v] Office of the United States Trade Representative. (2022). The People's Republic of China. United States Trade Representative. Retrieved June 22, 2022, from https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republic-china [vi] Paszak, P. (2021, March 4). China and the "Malacca Dilemma". Warsaw Institute. Retrieved June 22, 2022, from https://warsawinstitute.org/china-malacca-dilemma/

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