Adil Kaukenov, a well-known Sinologist, commented on the impending «economic downturn of China.» Here is his statement, as provided:
«When people write about the economy of China 🇨🇳, assessments vary dramatically, ranging from the liberal view of ‘I told you China is finished’ to the ultra-optimistic ‘the yuan will replace the dollar any day now.’
China’s economy today is an incredibly complex and massive mechanism involving not only the 1.5 billion people in China itself but practically the entire world, which is why its development sparks so much debate.
For example, the question of China’s GDP growth, which rose by 5.2% in the third quarter of 2023. Is this a lot or little?
Compared to other global giants, it’s a substantial growth rate. For instance, Germany’s 🇩🇪 GDP is not growing; it’s predicted to contract by 0.4% in 2023. And Germany is an economic flagship of the European Union.
However, when compared to China’s own GDP growth before the pandemic, it’s relatively low.
There are several surface-level problems in China’s economy:
Chinese people are reluctant to spend after a three-year quarantine.
The Chinese, by nature, have a passion for saving. However, after three years of uncertainty, they once again see the dangers of living on credit and the importance of having a financial cushion for a ‘rainy day.’
A crisis in the real estate and construction market.
For a long time, real estate and construction were engines driving economic growth and served as a magic pill to overcome stagnation. But this unrestrained growth has reached its limit and inflated a bubble, as clearly demonstrated by the default of the super-developer Evergrande (恒大集团).
High wage levels in China.
The times when China was known for its cheap labor have long passed. Now, workers from neighboring countries like Vietnam, Indonesia, Laos, Thailand, and others are willing to work for much lower wages than in China.
On the flip side, the qualification of China’s workforce has improved thanks to substantial government investments in secondary and higher education, a feat not every country can boast.
Competition with the United States, whose sanctions are affecting China’s most advanced sectors. However, these very sanctions are strengthening China’s high-tech sector, as demonstrated by Huawei (华为公祠) launching its own chip and operating system.
To achieve growth, one of the primary tools used by the Chinese government is to focus on stimulating domestic consumption, increasing the middle class, giving people more opportunities for leisure, and thus spending.
It’s an interesting paradox that, to achieve growth, one must not only work hard but also rest more.
In general, China’s economy is so deeply integrated into global production, connected by invisible chains to almost every country in the world, that a ‘hard landing’ is no longer a threat simply because it’s dangerous for the entire world.
However, the main challenge is to get stuck in the current situation, remaining in economic stagnation for decades, gradually losing the perspective of leadership to a growing India.
Whether China can transition to a different stage of development and become the world’s number one economy, we will see for ourselves over the next decade.»
