{"id":1516250,"date":"2022-06-15T06:36:15","date_gmt":"2022-06-15T10:36:15","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1516250"},"modified":"2022-06-15T06:36:23","modified_gmt":"2022-06-15T10:36:23","slug":"chinas-crisis-of-confidence","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/chinas-crisis-of-confidence\/","title":{"rendered":"China\u2019s Crisis of Confidence"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">8<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fchinas-crisis-of-confidence%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1516250&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><div><\/div>\n<div>\n<p>What if the new era of great-power competition was over before it had even begun? Many of today\u2019s fears about a multigeneration conflict with Beijing rest on linear extrapolations of yesteryear\u2019s data, harkening back to a time when China appeared on track to supplant the United States as the world\u2019s largest economy. Yet more and more signs point to a China that is fully unprepared for the competition with the United States it once sought.<\/p>\n<p>China\u2019s economy, long in decline, is now in <a href=\"https:\/\/www.cnn.com\/2022\/05\/05\/economy\/china-economy-services-decline-covid-intl-hnk\/index.html\">freefall<\/a>\u2014thanks to Chinese leader Xi Jinping\u2019s mismanagement. Case in point: This year, the <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2022-05-20\/us-growth-seen-outpacing-china-s-for-first-time-since-1976\">U.S. economy<\/a> is forecast to grow faster than China\u2019s for the first time since 1976, with strong indications that China has entered a prolonged era of slow growth. More surprising is that Xi, in an attempt to stabilize China\u2019s finances, has largely abandoned his ambitious plans to overhaul China\u2019s growth model, choosing instead to double down on the very economic policies that got China into today\u2019s economic bind in the first place.<\/p>\n<p>Put differently, Xi blinked.<\/p>\n<\/p><\/div>\n<div>\n<p>What if the new era of great-power competition was over before it had even begun? Many of today\u2019s fears about a multigeneration conflict with Beijing rest on linear extrapolations of yesteryear\u2019s data, harkening back to a time when China appeared on track to supplant the United States as the world\u2019s largest economy. Yet more and more signs point to a China that is fully unprepared for the competition with the United States it once sought.<\/p>\n<p>China\u2019s economy, long in decline, is now in <a href=\"https:\/\/www.cnn.com\/2022\/05\/05\/economy\/china-economy-services-decline-covid-intl-hnk\/index.html\">freefall<\/a>\u2014thanks to Chinese leader Xi Jinping\u2019s mismanagement. Case in point: This year, the <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2022-05-20\/us-growth-seen-outpacing-china-s-for-first-time-since-1976\">U.S. economy<\/a> is forecast to grow faster than China\u2019s for the first time since 1976, with strong indications that China has entered a prolonged era of slow growth. More surprising is that Xi, in an attempt to stabilize China\u2019s finances, has largely abandoned his ambitious plans to overhaul China\u2019s growth model, choosing instead to double down on the very economic policies that got China into today\u2019s economic bind in the first place.<\/p>\n<p>Put differently, Xi blinked.<\/p>\n<p>Xi\u2019s reversal speaks volumes. It suggests he lacks confidence in his own plan to transform China\u2019s unsustainable economic model into one that can deliver on the Chinese Communist Party\u2019s (CCP) <a href=\"https:\/\/foreignpolicy.com\/2019\/03\/17\/chinas-economic-black-box\/\">promise<\/a> of \u201chigh quality\u201d growth. More important is that China\u2019s fizzling economic miracle may soon undercut the CCP\u2019s ability to wage a sustained struggle for geostrategic dominance.<\/p>\n<p>This raises a tantalizing question: What if, instead of being a competitor, China cannot actually afford to compete at all?<\/p>\n<p>Xi is often said to have tapped into Chinese resentment over its colonial-era humiliations to kick-start its modern-day competition with the United States. But the decision to jettison China\u2019s policy of hiding its capabilities and biding its time began much earlier. Indeed, for decades before Xi\u2019s ascent into power, CCP elites made clear this dictum would be discarded as soon as the international <a href=\"https:\/\/www.mfa.gov.cn\/ce\/celr\/eng\/majorevents\/t375202.htm\">balance of power<\/a> shifted in China\u2019s favor. When Washington looked to be terminally weakened by the 2008 financial crisis, Chinese officials made their move, betting that overseas investments and economic coercion were the keys to outcompeting the West. They were mostly right.<\/p>\n<p>China\u2019s economic clout, beyond any other consideration, still serves as the foundation for the country\u2019s vast influence. The gravitational pull of China\u2019s market, along with Beijing\u2019s ability to influence economic conditions and shape political perceptions in other countries, enabled China to bind itself to the world. The fruits of China\u2019s economic expansion also underwrote its power projection, covering the costs of the Belt and Road Initiative, military modernization, and expanding multilateral commitments. China\u2019s GDP growth paid domestic dividends for the CCP too, empowering a model of state capitalism that broke down the barriers between the private sector and government institutions to mobilize the former in service of the latter.<\/p>\n<p>Nevertheless, China\u2019s meteoric rise, fueled by annual GDP growth above <a href=\"https:\/\/tradingeconomics.com\/china\/gdp-growth-annual#:~:text=For%202021%2C%20China%20has%20set,over%20four%20decades%20in%202020.\">6 percent<\/a>, appears over. Yes, China\u2019s economy has been cooling for years, plagued by systematic deficiencies like chronic overinvestment, massive debt loads, and a shrinking workforce, which has put enormous stresses on China\u2019s finances. But these systematic trends have been exacerbated, perhaps irreversibly, by China\u2019s disastrous pandemic response, where the lack of an effective domestic vaccine and the CCP\u2019s unwillingness to approve and purchase Western ones have made <a href=\"https:\/\/foreignpolicy.com\/2022\/05\/18\/beijing-lockdown-zero-covid-policy-economy-restrictions\/\">rolling lockdowns<\/a> a permanent way of life. So far, the CCP\u2019s containment measures have resulted in plummeting <a href=\"https:\/\/www.reuters.com\/world\/china\/chinas-economy-cools-sharply-april-lockdowns-bite-2022-05-16\/#:~:text=%22The%20upshot%20is%20that%20while,%2C%22%20Capital%20Economics%20analysts%20said.&#038;text=Industrial%20output%20around%20the%20Yangtze,in%20China&#039;s%20northeast%20shrank%2016.9%25.\">industrial output<\/a>, surging <a href=\"https:\/\/www.bbc.com\/news\/business-61461099\">unemployment<\/a>, capital <a href=\"https:\/\/www.scmp.com\/economy\/china-economy\/article\/3175575\/china-capital-outflows-us-battles-inflation-beijing-goes\">flight<\/a>, and a sinking <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2022-05-09\/yuan-sinks-1-against-dollar-as-covid-slowdown-concerns-worsen?sref=3OIZCXOE\">currency<\/a>.<\/p>\n<p>Efforts to stabilize the Chinese economy will be further strained by a deteriorating external environment, with the World Bank warning of <a href=\"https:\/\/www.washingtonpost.com\/business\/2022\/06\/07\/world-bank-global-growth-forecast-stagflation\/\">1970s-style stagflation<\/a> and reduced global demand for Chinese exports\u2014until now, the engine of China\u2019s growth. The economy remains severely dependent on vast supplies of imported fuel, grain, and other commodities whose prices have massively surged. Western technology transfer restrictions are also taking their toll. Another challenge is growing frustration in China\u2019s largest markets\u2014the United States and the European Union\u2014over Xi\u2019s support for Russia\u2019s invasion of Ukraine. Already, large multinational companies like <a href=\"https:\/\/www.wsj.com\/articles\/apple-looks-to-boost-production-outside-china-11653142077\">Apple<\/a> are shifting supply chains to Southeast Asia and other regions perceived as more stable while <a href=\"https:\/\/www.reuters.com\/world\/china\/expats-flee-shanghais-covid-lockdown-drags-2022-04-28\/\">expatriates<\/a> are abandoning the country and newly minted <a href=\"https:\/\/www.wsj.com\/articles\/chinas-lockdowns-prompt-a-rethinking-of-life-plans-among-the-young-11653822000\">college graduates<\/a> flee in droves. Indeed, China\u2019s <a href=\"https:\/\/foreignpolicy.com\/2022\/05\/31\/china-xi-economy-covid-lockdown-geopolitics\/\">brain drain<\/a> has begun.<\/p>\n<p>So far, Xi has offered few new ideas for remedying China\u2019s crisis, even as his subordinates warn about the need to \u201c<a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2022-05-18\/china-has-enough-policy-room-for-economic-challenges-li-says?sref=3OIZCXOE\">act decisively<\/a>\u201d to avoid financial ruin. Xi\u2019s big bet consists of an \u201call-out\u201d <a href=\"https:\/\/www.cnn.com\/2022\/04\/27\/economy\/china-xi-infrastructure-push-covid-lockdowns-intl-hnk\/index.html\">infrastructure push<\/a> to boost the economy\u2014the same approach that fueled China\u2019s current debt bubble, massive industrial overcapacity, and the creation of entire ghost cities of half-finished apartments. But such investments are unlikely to stimulate China\u2019s economy, not least because they are focused on propping up the least productive parts of China\u2019s economy, including the state sector. Making matters worse, Xi has offered little relief for Chinese consumers, the linchpin in his effort to drum up domestic consumption, decrease inequality, and reduce the economy\u2019s reliance on exports and unproductive investments. Consumers were integral to China\u2019s pandemic rebound in 2021 but now face growing fears about job security and sustained income losses from never-ending lockdowns.<\/p>\n<p>At the same time, one by one, Xi\u2019s signature economic initiatives have disappeared from the front pages of China\u2019s state-owned newspapers. That includes Xi\u2019s push for \u201c<a href=\"https:\/\/www.bbc.com\/news\/business-60034050\">common prosperity<\/a>,\u201d which ostensibly aimed to reduce extreme inequality by giving ordinary Chinese a greater share of the nation\u2019s wealth. Plans to introduce a property tax to slow down China\u2019s notorious real estate bubble\u2014where the elite have amassed vast fortunes\u2014have also been shelved. Chinese regulators have also signaled an end to Xi\u2019s crackdown on China\u2019s <a href=\"https:\/\/www.cnbc.com\/2022\/05\/18\/china-signals-easing-of-its-tech-crackdown-but-dont-expect-a-u-turn.html\">tech giants<\/a>, whose growing influence has long been viewed as a growing threat to the CCP\u2019s power. Nevertheless, <a href=\"https:\/\/www.cnbc.com\/2022\/04\/19\/investors-cautious-on-china-markets-amid-growth-concerns-delisting-fears.html\">foreign investors<\/a>, who lost billions of dollars on Chinese tech stocks tanked by Xi\u2019s policies, remain wary. With many Western banks warning that the regulatory risks of investing in China now outweigh the potential benefits, these investors may not come to Beijing\u2019s rescue either.<\/p>\n<p>Mere months before Xi\u2019s coronation to a third term as party secretary, CCP officials whose jobs it is to worry about economic growth, like Chinese Premier Li Keqiang, are now openly pitted against Xi and those more concerned with regime security and party control, such as Chinese Vice Premiers Han Zheng and Hu Chunhua. While Xi projects calm and warns <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2022-05-10\/mixed-messages-from-top-china-leaders-feed-speculation-of-split?sref=3OIZCXOE\">citizens<\/a> not to question his zero-COVID policies, Li refuses to endorse them and instead speaks of China\u2019s \u201ccomplicated and grave\u201d situation. This fractured policy environment, where ideological and technocratic factions battle for influence, is eerily reminiscent of late Chinese leader Mao Zedong\u2019s era. Just as it did then, today\u2019s intraparty clash will produce winners and losers. For now, the latter group includes Xi, who will probably be forced to make key personnel concessions during this fall\u2019s 20th National Party Congress to secure the support needed to guarantee a third term. For the remainder of 2022, China\u2019s worsening domestic challenges will remain the party\u2019s highest priority, and addressing them will take up an increasing share of China\u2019s economic resources. The upshot is that U.S.-China tensions will likely remain subdued, at least for the short-to-medium term.<\/p>\n<p>More difficult to predict, however, is how China\u2019s fight for resources and power will affect the country\u2019s various domestic stakeholders. For the first time in a while, China\u2019s state-owned enterprises, provincial and local governments, private companies, and citizens will be forced to compete for a piece of a pie that is no longer growing. As a result, funding trade-offs will be necessary, including those considered inconceivable when China\u2019s annual growth hovers around <a href=\"https:\/\/www.worldbank.org\/en\/country\/china\/overview\">10 percent<\/a>. That will include cuts to current and planned investments in China\u2019s power projection capabilities, both civilian and military.<\/p>\n<p>Outbound Chinese development loans, a key tool for Beijing to expand relations across Asia and Africa, have already <a href=\"https:\/\/www.ft.com\/content\/1cb3e33b-e2c2-4743-ae41-d3fffffa4259\">dropped 96 percent<\/a> in recent years, from $75 billion in 2016 to approximately $4 billion during the pandemic. The overall average value of Belt and Road Initiative-related projects, averaging <a href=\"https:\/\/www.refinitiv.com\/content\/dam\/marketing\/en_us\/documents\/reports\/re1638498-cross-360-brochure.pdf\">$255 billion<\/a> annually between 2010 and 2019, also cratered to less than $81 billion in 2020. Although these figures may recover slightly, Chinese policymakers will be hard pressed to justify such expenditures as China\u2019s economy falters.<\/p>\n<p>Similar trade-offs will also be necessary for certain aspects of China\u2019s defense spending. In a contested resource environment, tensions will almost certainly emerge between China\u2019s army, navy, and domestic security apparatus. The same goes for civil-military relations because local officials are often expected to provide the military with the materiel and support required for training and large-scale exercises. Overtime, China\u2019s economic slowdown could also lead to civil unrest, which could force the military to become more involved in maintaining domestic security at the expense of its broader modernization. Potential economic constraints could also impede plans to fully fund newly announced ventures, such as China\u2019s space force. Over the long term, China could be forced to choose among certain core missions, such as monitoring China\u2019s coast, building up its South China Sea outposts, maintaining its air defense identification zone, and even protecting its unruly borders. Either way, China\u2019s military will be forced to do more with less.<\/p>\n<p>In the end though, China\u2019s sustained economic cooldown and Xi\u2019s crisis of confidence will result in the very outcome he, the CCP, and Chinese nationalists feared most: broad recognition that China may be incapable of competing with the United States at all.<\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>What if the new era of great-power competition was over before it had even begun? Many of today\u2019s fears about a multigeneration conflict with Beijing rest on linear extrapolations<\/p>\n","protected":false},"author":1,"featured_media":2315279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1516250","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1516250","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1516250"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1516250\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2315279"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1516250"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1516250"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1516250"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}