Tuesday, September 26, 2023
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China’s Economy Hits a Downward Spiral

China will continue to be a significant economy for many decades, but it is currently experiencing a slow and long-term decline. This observation has garnered global attention recently, with headlines proclaiming “the end of the Chinese miracle.” However, economists and commentators have been warning about this possibility for years. The Chinese Communist Party has been optimistic about a return to higher economic growth post-COVID-19, but growth has remained stagnant. Reliable indicators of China’s declining state exist, despite the lack of clear data from the regime. Previously bullish international investors, including BlackRock, have now changed their stance. Two key events have had a major impact on assessments of China’s economic state. Firstly, the regime stopped publishing youth unemployment data after it reached a high of 21.3%, indicating that the actual rate may be even higher. Secondly, major Chinese property developers, such as Evergrande and Country Garden, have faced significant financial difficulties. China’s three trillion dollar trust industry is also facing challenges. This decline in the Chinese economy predates Xi Jinping, but his policies have exacerbated the situation. Xi’s hostility towards private enterprise and emphasis on self-reliance and saving have hindered efforts to address the growing issues in the Chinese economy. The imbalance between savings, investment, and productive growth has been developing for over a decade. The challenges facing China are worsened by the decline in the fertility rate and foreign investors dumping Chinese stocks and bonds due to concerns over risk. China is likely to remain a substantial economy for many years, but it is currently in a slow and long-term decline. The regime’s fundamental policies have not changed despite talk of investment stimulus. Foreign firms are leaving the country, and countries like Portugal, Italy, and Germany are starting to challenge trade imbalances. Xi’s unwillingness to share power and modify his ideological imperatives is becoming evident, and the stability of China is questionable. The recent disappearances and purging of high-ranking officials within the CCP suggest internal conflicts within the party. This situation does not bode well for the country. With domestic discontent growing, Xi has escalated nationalist rhetoric, increasing military intimidation towards Taiwan and aggression against other nations. The potential consequences for countries like Australia are significant, as their economy remains dependent on trade with China. Additionally, there is concern over Xi’s bellicose rhetoric and the risk of a miscalculation.

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