The future of the world depends on China, one might assume? In any case, how China decides how and in which direction it develops will have a significant impact on the coming decades. It has huge economic, technical and cultural potential, but also huge problems. Whatever one judges the leadership there, it is not to be envied. Here are some points from three relevant articles.
China’s failed zero-Covid policy has currently caused enormous economic damage. But it also applies: In the last
For decades, China’s economy has grown enormously. China is now a middle-income country but must continue to fight poverty. The economic model responsible for the previous successes has gotten into trouble. A solution to fundamental structural problems is essential to prevent growth rates from flattening out.
Export has been the driving factor that makes the country dependent on global demand.
Since 2000, exports as a share of gross domestic product have been 24 percent or more, with peaks of over 35 percent in 2005 and 2006.
Especially for such a large economy, these were very high values that global economic slowdown, the trade war with the USA and the corona problems. In 2021, the GDP share of exports was only 19 percent. In the interest of its economic stability, China must therefore expand domestic demand strongly and quickly.
The biggest obstacle to more consumption is the high level of mortgage debt among Chinese households. The Chinese save a lot and invest their savings primarily in apartments, i.e. in the real estate sector, and often trade with them.
There is probably no other economy in the world that is so dependent on housing construction. China is sitting on a huge real estate bubbleon a high level of vacancies, which ties up and endangers a considerable part of the citizens’ assets.
The communist planners allowed things to be built beyond what was needed. China already has far too much real estate. The same living space is available per inhabitant as in Germany, while per capita economic output is a quarter of the level in Germany. Around 65 million apartments are currently empty in China.
There is also (apart from demographics) another problematic economic development. China’s comparative advantage over the West in labor costs will continue to decline, lowering China’s long-term growth potential.
The article puts it this way:
China’s high growth based on investment, low-cost production and exports has largely reached its limits and created economic, social and environmental imbalances.
Another from Chinas challenges lies in the question “Why is China so Obsessed With Food Security“?
Although China is home to a fifth of the world‘s population, it only owns around 7% of the world‘s cultivated land. And the percentage of land suitable for cultivation in China shrank from 19% in 2010 to just 13% in 2020, driven by urbanization and widespread soil and water pollution. Notably, China still manages to produce 95% of its primary grain needs (wheat and rice), thanks in part to efficient production. China’s wheat production per hectare is almost 50% higher than that of the United States (although almost half that of the world‘s most efficient country, the Netherlands).
However, even with the small relative deficit of 5%, China is still one of the largest wheat importers in the world. This also applies to corn imports. Only 10% of the national requirement is imported here. But this will make the country the largest global corn importer. Likewise for barley and oilseeds. Likewise, China consumes nearly 120 million tons of soybeans annually (nearly the amount of the US soybean crop). Of this it has to import over 100 million tons, about 62% of all internationally traded soybeans. And without soy, China’s pork industry – the world‘s largest – would collapse. This would eliminate China’s most important protein source.
Therefore, China is in a strategic dilemma:
The vast majority of these food imports (as well as 80% of China’s oil and much of its other resources) enter China by sea, having traveled long distances across the Pacific or Indian Oceans. This would make it extremely easy to block or otherwise interrupt them.
This shows that China is pretty much the opposite of Russia. It is forced to import huge amounts of energy, food and other raw materials, but produces and exports a large part of the world‘s industrial goods. So it is still less self-sufficient than Russia – but far more important to the global economy. However, listen
if China were to go to war with the US over Taiwan or some other issue, millions of Chinese would face starvation in no time, regardless of the damage China’s cutting off the world economy would do to its enemies as well. Beijing must solve this problem before it can embark on such adventures.
For all of China’s problems, we should not overlook its strengths. For example, the NZZ recently said that, according to an Australian think tank overtakes the USA in 37 out of 44 key technologies have. Now, a study doesn’t make any proof yet, but folks are hearing the signals.
Obviously, the future of the Chinese giant and its real military, political and economic potential are difficult to assess. It is completely unclear to me whether the glass is half full or half empty for peaceful cooperation. We need to take a much closer look and maybe learn more Chinese to be able to study original sources. The fact that, as is often the case with Putin, we overhear the original tones inside shouldn’t happen to us with the Chinese giant.