And some of China’s economic troubles come from greater global isolation. It is actively courting foreign investors once more, and keen to mend its fences with Australia.īut some analysts also think it has dropped the infrastructure stimulus spending habit because President Xi is now more focused on matching the US in key technologies than just raw GDP growth. It is partly talking up 2013-style reforms again, promising to reverse its crackdowns on the private sector, setting new targets for consumer spending, and has even eased housing credit. Since then, President Xi’s decision-making record both at home and in foreign policy has been decidedly patchy.Ĭhina is reacting to its latest troubles in lots of different ways at once. In the end, he doubled down on China’s massive state-owned enterprises as a foundation not just of the economy but of the Communist Party’s power, too. He soon complained that greater integration with the West was “hijacking” China’s economy. He would switch to consumer-led growth, open up further to foreign businesses, and end the forced channelling of China’s savings into investment.īut it became the road not taken. Xi Jinping had once looked set for another great moment in China’s open door reforms in 2013, soon after he took over. But years of diminishing returns on massive construction investment have now come home to roost.Īs Rio Tinto chief executive Jakob Stausholm said this week, with prices and profits falling on key raw materials, it may not be clear for some months if China will stimulate its economy again to drive steel production and iron ore imports.Ĭhina has never been interested in a patronising bargain to join the US-led club of the rules-based order. It was justified because China was so large and urbanisation still had a long way to run. David RoweĬhina has been the world’s growth engine for decades, but this week the International Monetary Fund said that China is now a threat to global growth this year, and a special concern to Australia, which is heavily leveraged to China.Ĭhina has been warned for years that the investment-led model which it turbocharged after the global financial crisis – naming a GDP target, then piling on credit until it was met – was not sustainable.ĭoing so gave Australia’s post-2003 commodity boom a second wind. The trade war is hurting both the US and China, and US officials have made it clear decoupling is not even possible. While the rest of the world is suffering from inflation as supply tries to keep up with demand, post-pandemic China is teetering on deflation – slumping domestic demand, slowing exports, very high youth unemployment, and an overhang of a collapsing real estate bubble that is sapping consumer confidence in ways not even communist dictators can control. Yet it comes in the same week that China’s ruling Politburo has been forced to speak with unusual frankness about the economy. The mysterious vanishing and then removal of China’s foreign minister Qin Gang has been a reminder that the politics of the world’s second most powerful and influential economy still takes place inside a black box.
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