{"id":2021068,"date":"2023-09-03T20:18:02","date_gmt":"2023-09-04T00:18:02","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/analysis-part-of-chinas-economic-miracle-was-a-mirage-reality-check-is-next\/"},"modified":"2023-09-03T20:22:37","modified_gmt":"2023-09-04T00:22:37","slug":"analysis-part-of-chinas-economic-miracle-was-a-mirage-reality-check-is-next","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/analysis-part-of-chinas-economic-miracle-was-a-mirage-reality-check-is-next\/","title":{"rendered":"China&#8217;s economic miracle was partly illusory. Time for a reality check."},"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\">22<\/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%2Fanalysis-part-of-chinas-economic-miracle-was-a-mirage-reality-check-is-next%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=2021068&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 class=\"entry-content\">\n<p>By Joe Cash<\/p>\n<p><strong>BEIJING (Reuters) \u2013 Chinese President Xi Jinping\u2019s\u200b first major reform plans a \u2064decade ago \u200bwere also his boldest, \u2062envisaging a transition to a Western-style free market economy driven by services and consumption by 2020.<\/strong><\/p>\n<div id=\"div-gpt-ad-1663871513696-art-1\" style=\"min-width: 320px; min-height: 50px;  text-align: center;\">  \t<script>  \t\tgoogletag.cmd.push(function() { googletag.display('div-gpt-ad-1663871513696-art-1'); });  \t<\/script>  <\/div>\n<div class=\"ad-slot__ad-label\">Advertisement<\/div>\n<\/p>\n<p>The\u2062 60-point agenda was \u2064meant to fix\u2064 an obsolete growth model\u200c better\u200d suited to \u2063less developed countries \u2013 however, most of those reforms have gone nowhere leaving the economy largely reliant on older policies that have only added to China\u2019s massive debt pile and industrial overcapacity.<\/p>\n<p>The failure to restructure the world\u2019s second-largest economy has raised critical questions about what comes next for China.<\/p>\n<p>While many analysts see a slow drift towards Japan-style stagnation as the most \u2063likely outcome, there \u200dis also the prospect of a more severe crunch.<\/p>\n<p>\u201cThings always fail slowly until they suddenly break,\u201d said William Hurst,\u2062 Chong \u200bHua Professor of Chinese Development at University of Cambridge.<\/p>\n<p>\u201cThere is a significant risk in the short term of financial crisis or other degree of economic crisis that would carry very substantial social and political costs\u2062 for the Chinese government. Eventually there\u2019s going to have to be a reckoning.\u201d<\/p>\n<p>China came out\u200b of its \u2062Maoist planned economy in the 1980s as a largely rural society, badly in need\u2064 of factories and infrastructure. <\/p>\n<p>By the time the global financial crisis hit in 2008-09, it had already met most of \u200bits investment \u200dneeds\u200b for its\u200d level of development, economists say.<\/p>\n<p>Since then, the economy quadrupled\u2062 in nominal terms while overall debt\u200d expanded nine times. To keep growth high, China in the 2010s\u2062 doubled down on infrastructure and \u200bproperty investment, at the expense of household consumption.<\/p>\n<p>That has kept consumer\u2063 demand weaker as \u2063a portion of\u200b GDP than \u200din\u2063 most other countries and concentrated job creation in the \u200cconstruction and industrial sectors, careers increasingly spurned by young university graduates.<\/p>\n<p>The policy\u200c focus also bloated China\u2019s\u2063 property sector to a quarter \u2063of economic activity\u2063 and \u2063<a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/6-california-bills-target-housing-crisis\/\" title=\"6 CA Bills Tackle Housing Crisis\">made local governments<\/a> so\u2062 reliant \u200don debt that\u2063 many\u2063 now struggle to refinance.<\/p>\n<p>The pandemic,\u200d a demographic downturn and\u200d geopolitical \u200btensions have exacerbated all these problems\u2063 to the point that the economy has found it hard to recover this year\u2062 even as China reopened.<\/p>\n<p>\u201cWe\u2019re at a moment when \u200dwe are\u200d seeing some structural shifts, but we should\u2062 have seen these coming,\u201d said Max Zenglein, chief economist at MERICS, a China studies institute.<\/p>\n<p>\u201cWe\u2019re just beginning to be confronted with the reality. We\u2019re in untested territory.\u201d<\/p>\n<p>The\u200b end of China\u2019s\u2064 economic boom will likely hurt\u2063 commodity exporters and \u2063export disinflation around the world. At home, it will \u200cthreaten living standards for millions of unemployed graduates and many whose wealth is tied \u2062up in property, posing social stability risks.<\/p>\n<p><strong>CRISIS VS STAGNATION<\/strong><\/p>\n<p>Aside from short-term solutions, which would likely only perpetuate debt-fueled investment, economists see three options for China.<\/p>\n<p>One is a swift, painful crisis that writes off debt, curbs excess industrial capacity and deflates \u2063the\u2062 property bubble. Another is a decades-long \u200cprocess in which China winds down \u2063these excesses gradually at the expense of growth. The third\u2063 is switching to a consumer-led model with structural reforms that cause some near-term pain but help it re-emerge faster and\u200c stronger.<\/p>\n<p>A \u200bcrisis\u2064 could unfold if\u2064 the massive property market collapses in an uncontrolled way, dragging the financial sector with it.<\/p>\n<p>The other high-stress point is local government debt, estimated by the International Monetary Fund at $9 trillion. China promised in July to come up \u200bwith a \u201cbasket of measures\u201d to address municipal debt risks, without detailing.<\/p>\n<p>Logan Wright, a partner at Rhodium Group, says Beijing has to decide which portion of that debt to rescue, as the amount is\u2062 too large to provide\u200b full \u2062guarantees\u2063 of repayment, which the market currently regards as implicit.<\/p>\n<p>\u201cCrisis is going to occur \u2064in China when government credibility falters,\u201d he said.<\/p>\n<p>\u201cWhen all of a sudden\u2062 funding is cut off for the remaining investments \u2062that seem subject to market risk, that\u2019s a huge moment of uncertainty in China\u2019s financial\u200d markets.\u201d<\/p>\n<p>But given state control of many developers and\u200c banks and a tight capital account that limits outflows into assets abroad, that is a low\u2063 risk scenario,\u200d many \u2062economists say.<\/p>\n<p>Alicia Garcia\u2062 Herrero, chief economist for Asia Pacific at Natixis, expects\u200b there would be \u200bplenty of buyers if \u2063Beijing consolidates debt given limited\u2062 investment alternatives.<\/p>\n<p>\u201cI\u200c am more in the slow growth camp,\u201d she said. \u201cThe more \u200bdebt is piled up for projects that are not productive, the lower the return on assets, particularly public investment, and \u2064that really means that \u2063China \u200ccannot grow its way out.\u201d<\/p>\n<p>Avoiding a crisis by\u200b extending the adjustment period, however, has its own stability risks with youth unemployment topping 21% and around 70% of household \u200cwealth\u200b invested in property.<\/p>\n<p>\u201cOne of China\u2019s biggest success stories, building a\u200d strong middle class, is also becoming its biggest vulnerability,\u201d said MERICS\u2019 Zenglein. \u201cIf you look at \u2062it from the \u200dperspective \u2064of a younger person, you \u200bare now at risk of being the first post-reform generation whose economic wellbeing might\u2062 hit a wall. If \u200bthe message\u2064 is tighten up your belts and roll up your sleeves, that\u2019s going to be \u200bkind\u2063 of a hard sell.\u201d<\/p>\n<p><strong>REFORMS, THIS\u2063 TIME?<\/strong><\/p>\n<p>The third path, actively \u200dswitching to a new model, is considered very\u200b unlikely, based on what happened \u200dto Xi\u2019s 60-point programme.<\/p>\n<p>Those plans have barely been \u2063mentioned \u2063since 2015\u200c when a capital\u200d outflows scare \u2062sent\u2062 stocks and the yuan tumbling and engendered\u2064 an \u2063official \u200baversion to potentially disruptive reforms, analysts\u200c say.<\/p>\n<p>China has since backed away from major financial market liberalisation while plans to rein in state behemoths and <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/analysis-part-of-chinas-economic-miracle-was-a-mirage-reality-check-is-next\/\" title=\"China's economic miracle was partly illusory. Time for a reality check.\">introduce universal social welfare<\/a> never quite materialised.<\/p>\n<p>\u201cRight now is \u200ba time in which there\u2019s\u200d a potential for the\u2064 train to change direction to a new \u2063model, and I think there\u2019s appetite \u2062to do that,\u201d said Hurst.<\/p>\n<p>\u201cBut \u2064at the same time there\u2019s a great fear of the short-term political and social risk, especially of provoking an economic crisis.\u201d<\/p>\n<\/p>\n<p>  (Additional reporting by Liangping Gao and Kevin Yao; Graphics by Kripa Jayaram; Editing by\u200d Marius Zaharia and Sam \u200cHolmes)<\/p>\n<p><a href=\"https:\/\/www.oann.com\/uncategorized\/analysis-part-of-chinas-economic\/attachment\/file-photo-people-walk-in-the-central-business-district-on\/\"><\/a><\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<h2>This \u2063week&#8217;s Major Headlines<\/h2>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>Mark\u200d Mix of\u2062 the National \u2064Right to\u2064 Work Legal Defense Foundation\u200d says his organization is fighting \u2063Big Labor\u2019s Pro Act in Congress.<\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>The Heritage Foundation\u2019s Brent Sadler\u200b says the recent drone attacks on\u2063 Russian soil may be intended to provoke\u2064 a \u2063negotiated solution with\u2063 Russia<\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>Joe Biden celebrates the US Jobs Report, hides Hunter\u2019s job reports and delivered some nice gas prices just in time for Labor Day Weekend.<\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>(Reuters)\u200c \u2013 Cryptocurrency exchange Gemini\u2063 is \u200ctrying \u200dto rally other creditors behind a plan to wring more money out of bankrupt crypto\u2026\u200d <\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>By Echo \u2062Wang NEW YORK (Reuters) \u2013 Arm Holdings\u200c Ltd is targeting a valuation between $50 billion to $55 billion for its\u2026 \u2063 <\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>(Reuters) -Meta Platforms is considering \u2063paid versions of Facebook\u200c and Instagram with no advertisements for users residing in the European \u2064Union (EU)\u2026 <\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>(Reuters) \u2013 Shares in Dell Technologies Inc rose\u2064 22.2% and\u2063 hit a record high on Friday \u2063after it \u200craised full-year \u200dfinancial forecasts\u2026 <\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Chinese President Xi Jinping&#8217;s initial reform plans aimed to transition China&#8217;s economy to a Western-style free market driven by services and consumption by 2020. The 60-point agenda sought to address an outdated growth model more suitable for less developed nations.<\/p>\n","protected":false},"author":66,"featured_media":2021069,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[542],"tags":[],"class_list":["post-2021068","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-oann"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2021068","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\/66"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=2021068"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2021068\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2021069"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=2021068"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=2021068"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=2021068"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}