Hi Friend, U.S. President Joe Biden called China a "ticking time bomb" this month because of economic challenges and weak economic growth.
David Roche, president and global strategist at Independent Strategy, said “China’s economic model is washed up on the beach” and “it's not going to take off again.”
“A ticking time bomb, washed up on the beach?” It’s not looking too good for the second largest economy in the world, or is it?
Speaking at a political fundraiser in Utah, Biden said, “China has got some problems. That’s not good, because when bad folks have bad problems, they do bad things.”
Biden said he did not want to hurt China and wanted a rational relationship with the country. Then he signed an executive order to prohibit new U.S. exports and investment in sensitive technologies including semiconductors, microelectronics, quantum computing, and artificial intelligence capabilities.
China, said it was "gravely concerned" about the order and reserved the right to take measures, complaining of blatant economic coercion. “China is strongly dissatisfied with, and resolutely opposed, to the restrictions on investment in China,” the Foreign Affairs Ministry said in a statement. “This is blatant economic coercion and technological bullying.”
The Chinese Embassy in Washington called the move by the Biden administration another attempt to “politicize and weaponize trade” between the world’s two largest economies.
Eswar Prasad, economics professor, Cornell University added to the gloom … “Confidence is falling, growth is stalling, China seems to be sliding into a downward spiral with deflation, low growth and lack of confidence all feeding on each other.”
Peter S. Goodman, an economics reporter, points to a “slew of developments” supporting the new narrative. These include declining Chinese exports and imports, falling prices on a range of goods, from food to apartments, a housing slump, and a real-estate default that has produced losses of US$ 7.6 billion. (A sizeable event, but nothing close to the average US bank bailout).
China Suspends Data on Youth Unemployment ...
This week, China suspended releases of data on youth unemployment, lately recorded at over 20%. July economic data showed a broad slowdown exacerbated by the country’s property market slump.
Market worries about spillover from China’s massive real estate sector to the rest of the economy have reemerged this month as once healthy developer Country Garden hovers on the brink of default and Evergrande filed for bankruptcy protection in the U.S.
Biden had a dire prediction about the country's future. "China is a ticking time bomb ... China is in trouble. China was growing at 8% a year to maintain growth. It’s now close to 2% a year," he said.
Never too great on detail, data from China's National Bureau of Statistics showed the economy grew 4.5% in the first quarter and 6.3% in the second. The ruling Chinese Communist Party has set a growth target of 5% for 2023.
China’s central bank has moved to alleviate concerns about the country’s slow growth as global investors pare back their exposure to the world’s second largest economy.
The bank has already reduced holdings of U.S. dollars down to under $900 billion from $1.3 trillion at peak. The central bank has stepped up exchange rate intervention after yuan hit a 16-year low against the Dollar.
In a move to stabilize markets, authorities have asked investment funds, to “avoid being net sellers of equities”.
In a press conference Wednesday, Chinese Foreign Ministry Wang Wenbin insisted the country’s recovery is “generally on a sound track”. China “remains an important engine for world economic growth,” after growing by 5.5% year-on-year in the first half of 2023.
He highlighted a higher share of domestic demand as a portion of economic growth. He talked of continued upgrades to industrial infrastructure, investment in high-tech industries and rising exports of electric cars, lithium batteries and solar panels.
“The results of our response are already showing. Substantive measures aimed at promoting consumption, boosting the private sector, and attracting foreign investment are already in place,” Wang said.
“The Chinese economy enjoys strong resilience, ample potential and robust dynamism and the fundamentals sustaining China’s sound economic growth in the long run remain unchanged.” “Action will be taken to adjust policy to ward off instability”.
U.S. Narratives Are Geared Towards The 2024 election ...
J K Galbraith writing for the South China Morning Posts affirms China’s economy is slowing. It will be hard to scale anything to match the cities and transport networks that are already in place, or the campaign to eliminate extreme poverty.
China’s main tasks now lie elsewhere, in education and healthcare, in matching skills to jobs, in mitigating youth unemployment, in providing for the elderly and in curbing carbon dioxide emissions. They will be pursued in Chinese fashion: step by step, over time.
So, what is the new narrative really about? It is not so much about China as it is about the U.S. It is about a lead in technologies, a free-market system, and an attempt to wield power and to keep all challengers at bay. It is about reinforcing what Westerners like to believe, the inevitable triumph of capitalism and democracy.
Above all, it is about American leaders, posing for the electorate, winning out against “bad folks” who may do “bad things”. It’s a narrative that’s made-to-measure for the 2024 election campaign.
It is as myopic and counter productive as it is short-lived. China will still overtake the U.S. as the largest economy in the world. It may just take a bit longer than we first thought. It may just have to do it, with its own chips.
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