At an economic forum last week in Shanghai, a senior Chinese government adviser named Liu Yuanchun, who is also the president of the Shanghai University of Finance and Economics, made some stark remarks about the state of the Chinese economy.
Liu said
that the effects of the COVID-19 pandemic were far worse than expected and that
the fiscal standing of local governments is deteriorating quicker than thought.
Seismic, structural shifts are happening rapidly, and more non-economic risks
are emerging than economic ones. All of this has created imbalances that
Beijing is struggling to navigate. According to Liu, China’s development in the
recent past and immediate future will be marked by such disequilibrium, and
striking a new balance will take time.
He went
on to say these challenges from within – and the economic competition from
powers without – are more daunting than the ones of a decade ago, when China
was able to achieve double-digit economic growth. Growth now is much more
uneven, of course, and even President Xi Jinping seems to have admitted as much
when he called moderate growth the “new normal.” Evidence to that effect can be
seen in China’s overcapacity issues, with the producer price index declining in
March by 2.8 percent year on year, while languishing in the negative range for
the 17th straight month. Supply-demand disequilibrium is apparent, too, with
the first quarter’s utilization rate at just 73.6 percent, down some 7
percentage points. In short, capacity is sitting idle.
Liu also
warned that the consumer price index, which grew in March by 0.1 percent year
on year after expanding by 0.7 percent in February, is too off-kilter to
achieve Beijing’s targeted supply-demand balance of 2-3 percent.
Perhaps
most importantly, Liu said that these and other economic imbalances are here to
stay. The downturn in the property market is particularly noteworthy.
Property-sector investments fell in the first quarter of 2024 by 9.5 percent
year over year, with total sales dropping by 27.6 percent. In other words, the
days of the property sector being a “super pillar” of the Chinese economy are
gone. (The sector used to account for nearly 11 percent of gross domestic
product but stood at nearly 6 percent as of 2023.) Beijing is looking to other
sectors such as high-tech manufacturing and electric vehicles to fill the void,
but so far they have yet to do so.
What
makes the statements made by Liu – who is an adviser to Xi, meaning his speech
was likely approved by the president himself – so important is that they
indicate Beijing is finally coming to terms with the obvious. The long-held
conventional wisdom was that China’s would be an unending surge, but even in
the heyday of growth, its economy was limited and unbalanced. But economic
risks are expanding amid geopolitical uncertainties, the root of which, for
China, was a decision a few years ago to threaten the United States with
potential future military action. The threat was an unrealized bluff, but its
most important outcome was to convince the U.S. that it was real.
Under
those circumstances, the U.S. government adopted a hostile economic posture
toward China, and private corporations in the United States saw an increased
risk in operating there. Rather than increase economic activity to placate the
U.S., Beijing sought the opposite outcome, curbing its access to U.S.
investment. That created another imbalance, this one based on the assumption
that Chinese exports to the U.S. and U.S. investment in China would not dip low
enough to seriously threaten the economy.
Economists
like Liu focus on the economics of a given event, but the real question is
political. How private industry will respond is important; more important is
how the public will respond. In China, economic fumbling can create desperate
citizens and launch the country into uncharted territory. The government is
working hard to contain unrest, and it seems to have now adopted a strategy of
honesty – a rarity for any government. Even so, its admission is less a matter
of altruism than it is a matter of strategy.
*** George
Friedman is an internationally recognized geopolitical forecaster and
strategist on international affairs and the founder and chairman of
Geopolitical Futures.
fecha |
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09/04/2024| |
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11/08/2023| |
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09/05/2023| |
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26/01/2023| |
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10/11/2021| |
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16/08/2020| |
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17/07/2020| |
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24/10/2013| |
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09/10/2013| |
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29/09/2013| |
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10/09/2013| |
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06/09/2013| |
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04/09/2013| |
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27/08/2013| |
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20/08/2013| |
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20/08/2013| |
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16/07/2013| |
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03/07/2013| |
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11/06/2013| |
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05/06/2013| |
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27/05/2013| |
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02/05/2013| |
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05/04/2013| |
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27/03/2013| |
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21/03/2013| |
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13/03/2013| |
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13/03/2013| |
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20/02/2013| |
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04/02/2013| |
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18/01/2013| |
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13/01/2013| |
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07/01/2013| |
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13/11/2012| |
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07/11/2012| |
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30/10/2012| |
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24/10/2012| |
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05/09/2012| |
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31/08/2012| |
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21/08/2012| |
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17/08/2012| |
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11/08/2012| |
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31/07/2012| |
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31/07/2012| |
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24/07/2012| |
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26/06/2012| |
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29/05/2012| |
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14/06/2011| |
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09/03/2011| |
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01/03/2011| |
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26/01/2011| |
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12/01/2011| |
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07/01/2011| |
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29/12/2010| |
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05/12/2010| |
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30/11/2010| |
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16/11/2010| |
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10/11/2010| |
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26/10/2010| |
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15/09/2010| |
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30/08/2010| |
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03/08/2010| |
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27/07/2010| |
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13/07/2010| |
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24/06/2010| |
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24/03/2010| |
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20/09/2009| |
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26/08/2009| |
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19/08/2009| |
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27/01/2009| |
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01/10/2008| |
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25/09/2008| |
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26/08/2008| |
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13/08/2008| |
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24/06/2008| |
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15/04/2008| |
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31/01/2008| |
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03/11/2007| |
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11/10/2007| |
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30/11/2006| |
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09/11/2006| |
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05/10/2006| |
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30/04/2006| |
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