Geopolitical Snapshot – Beijing’s view of the Chinese Economy
Dr. George Friedman’s take on the current economic climate in China
Dr. George Friedman is an internationally recognized geopolitical forecaster, international affairs strategist and best-selling author. As Founder and Chairman of Geopolitical Futures, an online publication dedicated to forecasting the course of global events, Friedman combines his passion for writing and publishing for his readers world wide who follow international affairs.
At a recent economic forum in Shanghai, Liu Yuanchun, a senior Chinese government adviser, discussed the significant challenges facing the Chinese economy. He highlighted that the impact of the COVID-19 pandemic has been more severe than anticipated, leading to rapid deterioration in the fiscal health of local governments. Liu emphasized the emergence of non-economic risks alongside seismic structural shifts, creating imbalances that Beijing is struggling to manage. China’s economic growth has become more uneven, with President Xi Jinping acknowledging a “new normal” of moderate growth. Issues such as overcapacity and supply-demand imbalances further underscore the economic challenges.
Liu pointed out the enduring nature of these imbalances, particularly noting the downturn in the property market, once a key driver of China’s economy. Despite efforts to transition to sectors like high-tech manufacturing, the void left by the property sector’s decline remains unfilled.
The significance of Liu’s statements lies in Beijing’s acknowledgment of these economic realities, marking a departure from previous perceptions of unending growth. Geopolitical tensions, exacerbated by past military posturing, have led to a hostile economic stance from the U.S., further complicating China’s economic landscape.
While economists like Liu analyze the economic implications, the broader political ramifications are crucial. Economic missteps could lead to public unrest, prompting the government to adopt a strategy of honesty to contain potential discontent. However, this admission is seen more as a strategic move than an act of altruism.
Key points:
- Challenges Facing Chinese Economy: Liu Yuanchun, a senior Chinese government adviser, outlined significant challenges confronting the Chinese economy, including the more severe than expected impact of the COVID-19 pandemic and rapid fiscal deterioration of local governments.
- Emergence of Non-Economic Risks: Alongside economic challenges, Liu highlighted the emergence of non-economic risks and seismic structural shifts, contributing to imbalances that Beijing is struggling to manage.
- Uneven Economic Growth: China’s economic growth has become more uneven, with President Xi Jinping acknowledging a “new normal” of moderate growth. Issues such as overcapacity and supply-demand imbalances further underscore the economic challenges.
- Downturn in Property Market: Liu pointed out the downturn in the property market, once a significant driver of China’s economy. Despite efforts to transition to sectors like high-tech manufacturing, the void left by the property sector’s decline remains unfilled.
- Geopolitical Tensions: Geopolitical tensions, exacerbated by past military posturing, have led to a hostile economic stance from the U.S., further complicating China’s economic landscape.
- Strategic Acknowledgment by Beijing: Beijing’s acknowledgment of these economic realities marks a departure from previous perceptions of unending growth. The government’s strategy of honesty aims to contain potential public discontent, but it’s seen more as a strategic move than an act of altruism.