Prof. ST Hsieh
Director, US-China Energy Industry Forum
August 14, 2023
China’s economy is slowing down, no doubt about it. But it is also true that the global economy, including the US, is slowing down too. Unfortunately, no matter how someone has tried to de-globalization or de-coupling of global economy, the global economy is still inter-connected. Now someone is softening their language to de-risking or diversification of supply chains. However, the anti-market strategy has damaged the global economy.
The slowing down of China’s economy, of course, is due to external forces in part. The other factor is, of course, due to the Chinese government implemented policies be it the COVID-19 lock down policy, tariff war with the US and the proxy war in Ukraine. Biden may claim some credits for weaking China, but the US faces challenges. There are major US challenges that can not be blamed on China, for example the mounting national deficits and the cultural war. It is probably better for Biden to focusing the US domestic challenges and win his second term reelection in 2014. If China’s economy were a ticking time bomb and exploded in Biden’s face, the global economy will sink into chaos! The US, China, other economies, good guys, and bad guys all will suffer.
In this sense, Biden cannot claim that China’s economy slowing down is a win for his China policy.
Yellen: China’s slowing growth could have spillover to US, still upbeat overall
Mon, August 14, 2023 at 2:24 PM PDT
LAS VEGAS, Aug 14 (Reuters) – U.S. Treasury Secretary Janet Yellen on Monday said China’s slowing growth, Russia’s war in Ukraine and climate change-related disasters could pose risks to economic developments globally, but she felt upbeat overall about the U.S. economy.
She said China’s slowdown could have spillover effects on the United States, but would have the biggest impact on its Asian neighbors.
“That said, I feel very good about U.S. prospects overall,” adding there remained a risk of recession in the United States, but she remained convinced U.S. growth remained healthy and the job market was very strong.
China’s Stalling Economy Puts the World on Notice
Peter S. Goodman
Sat, August 12, 2023 at 7:17 AM PDT
For more than a quarter-century, China has been synonymous with relentless development and upward mobility. As its 1.4 billion people gained an appetite for the wares of the world — Hollywood movies, South Korean electronics, iron ore mined in Australia — the global economy was propelled by a seemingly inexhaustible engine.
Now that engine is sputtering, posing alarming risks for Chinese households and economies around the planet. Long the centerpiece of a profit-enhancing version of globalization, China has devolved into the ultimate wild card in a moment of extraordinary uncertainty for the world’s economy.
The risks have been amplified in recent weeks by a slew of developments.
First came word that China’s economy had slowed substantially in the spring, extinguishing hopes of a robust expansion following the lifting of extreme COVID restrictions.
This week brought data showing that China’s exports have declined for three months in a row, while imports have dropped for five consecutive months — another indicator of flagging prospects.
Then came news that prices have fallen on a range of goods, from food to apartments, raising the specter that China could be on the brink of so-called deflation, or sustained drops in prices, a harbinger of anemic commercial activity.
And in a sign of deepening distress in China’s housing market — the intersection of finance, construction and household wealth — a major real estate developer called Country Garden missed payments on its bonds and estimated it lost up to $7.6 billion in the first half of the year.
Around the globe, a weakening Chinese economy signaled a shrinking of demand for major goods — from soybeans harvested in Brazil, to beef raised in the United States, to luxury goods made in Italy. It spelled less appetite for oil, minerals and other building blocks of industry.
“The slowdown in China is definitely going to weigh on the global economic outlook,” said Larry Hu, Hong Kong-based chief China economist for Macquarie, the Australian financial services firm. “Because China is now the No. 1 commodity consumer in the world, the impact is going to be pretty, pretty big.”
Adding to the worry is the widespread sense that Chinese authorities are limited in their options to reinvigorate the economy, given mounting debts now estimated at 282% of national output — more than that of the United States.
The government has outlined spending programs aimed at spurring consumers to spend and businesses to invest. But the details have been opaque, while leaving the impression that local governments will be stuck with the bill. Local governments are at the center of concerns about the debt crisis. They had borrowed aggressively for years to finance the construction of roads, bridges and industrial parks.
All of this is playing out as China’s ruling Communist Party tries to transition from an economy powered by state-directed investments in infrastructure and exports to one led by domestic consumer spending.
At the same time, private entrepreneurs started some of the world’s more innovative and valuable technology companies. In more recent years, many have been constrained by a regulatory crackdown overseen by President Xi Jinping.
In the rest of the world — and especially in the United States — China’s staggering export growth, combined with the loss of domestic factory jobs, has set off conflicts over trade.
The Trump administration imposed across-the-board tariffs on Chinese imports. The Biden administration has continued that policy, adding prohibitions on investment in key Chinese sectors such as advanced computer chips. President Joe Biden intensified that campaign in signing an executive order Wednesday barring investment in industries that can bolster China’s military.
On Thursday, Biden referred to China’s economic vulnerabilities as “a ticking time bomb,” adding, “When bad folks have problems, they do bad things.”
Faced with hostilities between Washington and Beijing and chastened during the pandemic by the difficulties moving products from Chinese factories to retailers in North America and Europe, multinational companies have shifted factory orders to countries like Vietnam, India and Mexico.
For Chinese policymakers, the alterations to the geography of international commerce have added urgency to the transition toward an economy centered on domestic spending power.
Chinese households have long been some of the most prodigious savers on Earth, owing to the fact that social safety nets are meager. Over the first half of this year, total household deposits in the Chinese banking system grew by some 12 trillion Chinese yuan (about $1.7 trillion), the largest expansion in a decade.
For China’s consumers, some of the extra ardor for stashing cash reflects the widespread recognition that real estate is a story full of unhappy endings. Decades of overinvestment by developers has yielded entire cities full of empty apartment blocks. As prices plunge, developers are halting projects midstream, leaving the skeletons of high-rises serving as monuments to a speculative bonanza gone awry.
This basic story has provoked comparisons to Japan, where the bursting of a speculative real estate bubble in the early 1990s led the country into three decades of decline.
Central to Japan’s slide was deflation, a term that sends shivers up the spines of economists.
Most economists think China will avoid that fate. Falling prices may soon reverse. And the government appears to have moderated its attacks on successful private businesses.
After years of demonizing private entrepreneurs, the government has lately signaled a pivot to a more “pro-growth, pro-business mindset,” said Bruce Pang, chief economist for Greater China at JLL, a real estate and investment management firm in Hong Kong. “The key policy priority will be how to boost domestic demand.”
Yet if the debt hanging over China’s economy limits the potency of the government’s response, that could bring about the worst fears: a plunge in housing prices, followed by expensive rescues of strapped lenders, and an unruly exodus of money.
That outcome most unnerves government officials, given that it could bring joblessness, business insolvencies and social strife.
Yet even if the government succeeds in overseeing a gradual economic slowdown, some see mounting challenges that threaten to provoke significant volatility.
The continued shifting of factory work away from China, along with the focus on centering the economy on domestic consumption, is likely to push down wages and household wealth. And even in a country controlled by a single unelected party, the loss of faith of large numbers of people may bring turbulence.
Biden calls China ‘ticking time bomb’ over economic challenges
NHK 202308-12 13 hours ago
US President Joe Biden has called China a “ticking time bomb” in reference to the country’s sluggish economic growth.
At a political fundraiser in the western state of Utah on Thursday, Biden pointed to China’s underlying economic challenges, including a high unemployment rate.
He expressed concern over possible effects on Beijing’s policymaking, saying “when bad folks have problems, they do bad things.”
White House National Security Council spokesperson John Kirby said on Friday that Biden’s remarks referred to China’s internal tensions, which could affect the way the country interacts with the world.
Biden also reiterated that the United States wants competition, not confrontation, with China, saying he looks forward to a “rational relationship” with Beijing.
The US and China have agreed to continue dialogue as Washington aims to stabilize bilateral ties. But observers say Biden’s comments may draw a sharp reaction from China.