[NTDTV, Beijing, April 30, 2022]China’s epidemic has hit the economy. Xi Jinping presided over a high-level meeting a few days ago and ordered to strictly prevent all kinds of “black swans and gray rhinos” incidents and ensure that the 20th National Congress of the Communist Party of China will be held.
Beijing acknowledges rising risks and challenges
Xi Jinping presided over a meeting of the Political Bureau of the CPC Central Committee on April 29 to analyze and study the current economic situation and economic work in China. The events of “Black Swan” and “Grey Rhino” welcome the 20th National Congress of the Communist Party of China.
Xinhua News Agency reported that the epidemic and the situation in Russia and Ukraine have led to increased risks and challenges, and the complexity, severity and uncertainty of China’s economic development environment have increased, and “stabilizing growth, employment, and prices” are facing new challenges.
The meeting reiterated “adhere to dynamic clearing” and called for “minimizing the impact of the epidemic on economic and social development.”
However, the CCP’s clean-up policy has caused long-term damage to the Chinese economy, especially the closure of Shanghai, which has dented investor confidence and damaged China’s overall business prospects. Shanghai is the city with the highest GDP in China and the place with the highest concentration of foreign businesses. The current situation in Shanghai reflects the dilemma of China’s business environment.
According to data from consultancy Capital Economics, China’s economy grew by 0.7% in the first quarter from the previous quarter, almost half of the 1.3% claimed in the official GDP report. Actual production and consumption figures are expected to be even more dismal in April after Shanghai’s total lockdown.
The Voice of America reported on April 29 that as the CCP still adheres to the policy of clearing and preventing the epidemic, it is becoming more and more difficult to achieve the economic growth target of 5.5%.
Lockdown measures accelerate the transfer of the industrial chain
The CCP’s blockade of Shanghai has accelerated the pace of industrial chain transfer. Shanghai is an important hub for the production and supply of global automobiles, semiconductors and electronic products. Tech companies such as Apple Inc and Tesla rely heavily on parts assembly at factories near Shanghai.
More than 160 Taiwanese companies operating in and around Shanghai have suspended production, including suppliers to Tesla and Apple, according to data from Taiwan’s financial regulator last week.
Apple issued a warning on April 28 that the CCP’s elimination of the epidemic prevention measures may cause a loss of $8 billion in sales in the current fiscal quarter, causing another setback to the supply chain improvement it has just seen.
The New York Times reported that automakers such as Shanghai-based SAIC and Tesla have resumed some production. “But automakers have been reluctant to predict when full capacity may be restored, let alone when overtime may begin to make up for the reductions in production this spring.”
“Global manufacturers are already reassessing the political and economic risks of doing business in China,” said William Reinsch, chairman of international business at the Center for Strategic and International Studies, a think-tank. The CCP’s dynamic clearing policy will accelerate this process.
Nick Vyas, director of global supply chain management at the USC Marshall School of Business, said, “Shanghai, as a core node in the supply chain, has really disrupted global operations. Some responsible companies have begun to diversify their operations strategies. Discuss and identify other ways of doing business, and many other companies will follow.”
Japan’s “Sankei Shimbun” Taipei branch director Akio Yaita posted on Facebook on April 12 that many Japanese friends doing business in China told him that they were planning to leave China.
“The closure of Shanghai this time made them (Japanese businessmen) realize the power of the iron fist of socialism and were frightened,” said Akio Yaita.
In addition, according to the “Washington Post” report, the director general of the World Trade Organization, Ngozi Okonjo-Iweala, said on April 26 that the supply chain congestion caused by the CCP virus epidemic has prompted global manufacturers to disperse supply chains from China to countries such as Vietnam, Cambodia and Bangladesh. China will pay for it.
Statistics show that in March this year, Vietnam’s total import and export trade reached a record 67.37 billion US dollars, an increase of 38.1% month-on-month, of which exports increased by 48.2% month-on-month. In the first quarter of this year, Vietnam’s exports of mobile phones and parts and related electronic products such as computers and accessories were close to the export level of the first half of last year. International brands such as Samsung, Intel, and Apple have all increased their business presence in Vietnam after the epidemic.
China’s troika stalls
China’s economy is facing downward pressure, and the “troika” of investment, exports and consumption is stalling.
According to statistics from the Institute of International Finance (IIF), in March of this year, US$17.5 billion of foreign capital was withdrawn from China. And foreign investors sold $5.5 billion in Chinese government bonds in February, rising to a record $8.1 billion in March.
The local governments of the CCP are already heavily indebted, and the local governments are simply unable to invest. The “investment” horse is already lame.
Exports are also slowing down further. According to statistics, the export trade in January and February this year only increased by 16.3%, which is slower than the same period last year. And this is the data before the outbreak.
After Shanghai closed the city at the end of March, Shanghai Bund became “Shanghai paralysis”. The transportation of goods in Shanghai Port has been paralyzed, not only the import and export of goods has been affected, but also the supply chain transportation of the manufacturing industry has been interrupted.
In addition, the world‘s most important “small commodity wholesale market” in Yiwu, Zhejiang has also been closed since April 27, and Guangzhou, where foreign trade is concentrated, has recently strengthened its closure and control again. It is difficult to be optimistic about China’s export trade this year.
Chinese consumption data was already weak long before the outbreak. The epidemic has been raging for two years, and the continuous closure and control has led to the closure of a large number of Chinese private enterprises and businesses, and the unemployed population has risen. Moreover, more than 10 million college students in China are about to graduate, and the employment crisis has intensified. This led to a further decline in consumption.
Chinese Premier Li Keqiang has been constantly shouting about “stabilizing employment and ensuring employment” recently. He said at the State Council executive meeting on April 27 that “stabilizing employment” is the key to maintaining economic operation within a reasonable range.
Tang Hao, the host of “Crossroads of the World“, said that Li Keqiang is very clear that the death point of China’s economy is the decline in consumption, and the source of the decline in consumption is the rise in unemployment, so no matter what, he must try his best to ensure employment.
He believes that another important reason is that unemployment will impact people’s lives and spending power. If the economy continues to decline, the scale of unemployment continues to expand, and finally there is a huge anti-government protest, it will shake the legitimacy of the CCP regime and give the CCP catastrophic crisis.
Tang Hao bluntly said that China’s investment, export and consumption “troika” this year are all lame, and enterprises are also short of workers and talents, so where does the Chinese economy have the confidence to achieve 5.5% growth?
Tang Hao: Xi Jinping faces challenges before the 20th National Congress
Xi Jinping ordered to strictly guard against “black swans and gray rhinos” before the 20th National Congress. In Tang Hao’s view, Xi is now facing various challenges.
He said that the current internal struggle in Zhongnanhai is very fierce. The epidemic in Shanghai can see the fierce game between the Xi faction and the anti-Xi faction. Next, the anti-Xi faction is likely to use the “failure of Shanghai’s epidemic prevention” to attack Xi Jinping and bring down Xi. People and horses, and even forced the palace of Xi Jinping. Therefore, Xi Jinping needs more significant political achievements as a bargaining chip to suppress the challenges and challenges of his opponents.
He believes that the reason why Xi Jinping ordered China’s GDP to exceed the United States this year is because Xi needs to use the economy to fight for the re-election of the 20th Congress, because he only has the economy as an option that can be “managed by me”. Economic data is indeed “controllable” by the CCP, and the international community is no stranger to the CCP’s digital fraud.
(Comprehensive report by reporter Luo Tingting/responsible editor: Fan Ming)
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