BEIJING (Xinhua) The coronavirus pandemic has brought China’s spectacular, nearly half-century-long streak of growth to a stop, highlighting the monumental task that world leaders face in reviving the global economy.
Chinese officials announced on Friday that the world’s second-largest economy shrank 6.8% in the first three months of this year compared to the same period last year, putting an end to a run of unbroken growth that lasted through the Tiananmen Square crackdown, the SARS epidemic, and even the global financial crisis. The figures reflect China’s aggressive attempts to eradicate the coronavirus, which included closing most industries and offices in January and February as the outbreak afflicted tens of thousands of people.
The harsh figures demonstrate how difficult it will be to get the global economy back on its feet. China has become possibly the world’s single most vital economic engine, lifting fortunes at prior times of distress, such as the financial crisis, since emerging from abysmal poverty and isolation more than 40 years ago.
Now, China is attempting to relaunch its $14 trillion economy, a move that might provide a much-needed boost to the rest of the world. The spread of the coronavirus to the United States and Europe, which paralyzed their economies, has prompted predictions that global output will contract considerably more this year than it did even during the financial crisis.
Will China see a downturn?
While a full-fledged Chinese financial crisis and recession cannot be ruled out, a rocky start to 2022with additional restructuring of offshore property debtis more plausible, followed by recovering growth later in the year in the run-up to the party congress. The greater danger may come in the years ahead. Housing appears unlikely to return as a key structural growth driver for China, for both political and demographic reasons, and there are few clear successors, especially given the leadership’s evident determination to prioritize self-sufficiency and political control over efficiency and growth.
Is China in financial trouble?
China is going through a slow-motion economic crisis that might jeopardize the existing regime’s stability and have major ramifications for the global economy. Despite the numerous red flags, Western analysts and policymakers believe Xi Jinping is capable of handling the issue. This kind of hope is wrong.
The United States and its allies have a variety of weapons to affect China’s economy, and they must evaluate the risks of a severe crisis against the threat that China’s current track offers to the United States. Instead of presuming that the Chinese economy’s strong growth and stability will continue, policymakers should consider how effectively to use these tools.
Is the Chinese economy doomed by 2021?
China’s economy grew at an annual rate of 8.1 percent in 2021, but Beijing is under pressure to boost activity following a sharp downturn in the second half. 5:53 a.m., January 17, 2022
What is the state of China’s economy?
- According to China’s National Bureau of Statistics, GDP increased by 4% in the fourth quarter compared to the previous year. China’s fourth-quarter GDP growth was predicted to be 3.6 percent, according to analysts polled by Reuters.
- Retail sales, on the other hand, fell short of estimates in December, rising only 1.7 percent year over year. Reuters polled analysts, who projected a rise of 3.7 percent.
- According to financial data source Wind Information, China analysts predicted an average annual growth rate of 8.4 percent in 2021.
Is China’s economy performing well?
Prior to the start of economic reforms and trade liberalization about 40 years ago, China’s policies kept the economy underdeveloped, stagnant, centrally managed, enormously inefficient, and isolated from the rest of the world. China has been one of the world’s fastest-growing economies since opening up to foreign trade and investment and implementing free-market reforms in 1979, with real annual gross domestic product (GDP) growth averaging 9.5 percent through 2018, a rate described by the World Bank as “the fastest sustained expansion by a major economy in history.” China has been able to quadruple its GDP every eight years on average, lifting an estimated 800 million people out of poverty. China has surpassed the United States as the world’s largest economy, manufacturer, merchandise trader, and holder of foreign exchange reserves (on a purchasing power parity basis). As a result, China has become one of America’s most important trading partners. China is the United States’ largest merchandise trading partner, largest import source, and third-largest export market. China is also the largest foreign holder of US Treasury bonds, which help pay the federal debt and keep interest rates low in the United States.
China’s economy has matured, and its real GDP growth has slowed dramatically, from 14.2% in 2007 to 6.6 percent in 2018, with the International Monetary Fund (IMF) projecting growth of 5.5 percent by 2024. Slower economic growth has been embraced by the Chinese government, which has dubbed it the “new normal” and acknowledged the need for China to adopt a new growth model that relies less on fixed investment and exports and more on private consumption, services, and innovation to drive economic growth. Such reforms are required for China to avoid falling into the middle-income trap, which occurs when countries reach a particular economic level but are unable to adopt new sources of growth, such as innovation, resulting in significantly declining economic growth rates.
The Chinese government has prioritized innovation in its economic planning through a number of high-profile initiatives, including “Made in China 2025,” a plan announced in 2015 to upgrade and modernize China’s manufacturing in ten key sectors with extensive government assistance in order to make China a major global player in these sectors. However, similar initiatives have sparked fears that China may employ industrial policies to reduce its reliance on foreign technology (including by keeping out international enterprises) and eventually dominate global markets.
The Trump administration initiated a Section 301 inquiry of China’s innovation and intellectual property practices, which were deemed damaging to US economic interests, in 2017. It then hiked taxes on $250 billion worth of Chinese imports by 25%, while China boosted levies on $110 billion worth of US goods by 5% to 25%. In 2019, such policies resulted in a significant drop in bilateral trade. President Trump indicated on May 10, 2019, that he was considering hiking tariffs on practically all remaining Chinese products. A long-running and intensifying trade war between the US and China might have disastrous effects for the Chinese economy.
China’s expanding worldwide economic influence, as well as its economic and trade policies, have enormous ramifications for the United States and are thus of great concern to Congress. While China is a significant and rising market for American businesses, the country’s delayed transition to a free-market economy has resulted in measures that are detrimental to American business interests, such as industrial restrictions and intellectual property theft. This paper covers the history of China’s economic rise, its current economic structure, the issues China confronts in maintaining economic growth, and the challenges, opportunities, and consequences of China’s economic rise for the United States.
What happens if the Chinese real estate market collapses?
Because of these ties, a slowdown in China’s housing sector might result in job losses, stock market declines, and deflation all of which could spread via global trade channels as China reduces its purchases of goods from other nations, according to Christopher. However, he believes that such repercussions are improbable.
Is China a communist country?
The People’s Republic of China uses the socialist market economy (SME) as its economic system and development model. Within a market economy, the system is built on the majority of public ownership and state-owned firms. Jiang Zemin coined the term “socialist market economy” to define the goal of China’s economic reforms during the 14th National Congress of the Chinese Communist Party (CCP) in 1992. The socialist market economy, which began in 1978 with Chinese economic reforms that linked China into the global market economy, is a preliminary or “basic stage” of establishing socialism. Some critics view the system as a sort of “state capitalism,” while others describe it as an original progression of Marxism, comparable to the Soviet Union’s “New Economic Policy,” geared to coexistence with a globalized capitalist system.
What is China’s debt to the United States?
Over the previous few decades, China has steadily increased its holdings of US Treasury securities. The Asian nation owns $1.065 trillion, or 3.68 percent, of the $28.9 trillion US national debt, more than any other foreign entity save Japan as of October 2021.