CHINA’S ECONOMY EDGES UP IN THIRD QUARTER
Following a number of policy tweaks by Beijing, China’s economy grew at an annual pace of 4.9 percent in this year’s third quarter, beating a Reuters poll of economists predictions of a 4.5-percent expansion.
The country’s GDP grew 1.3 percent in the third quarter, compared to the second.
The annual number compares to a period last year when China was still plagued by persistent, rolling anti-COVID lockdowns, which were eliminated late last November.
“The external environment is becoming more complex and grave while domestic demand remains insufficient and the foundation for economic recovery and growth needs to be further consolidated,” the National Bureau of Statistics said in a statement releasing the new figures.
The government’s policy changes responded to “cracks” in the country’s financial system and will give China a chance to reach its 5-percent growth target, the most modest in years, Alicia Garcia-Herrero, Nataxis’s chief Asia-Pacific analyst, said to the Financial Times.
However, “mild growth of 5 percent won’t be enough to cover those cracks,” she added. “If the world goes in the wrong direction, it’s going to be very difficult for China to avoid those cracks getting deeper.”
The uptick in China’s growth was aided by a record $200 billion in trade with Russia.
This year also marks the 10th anniversary of China’s troubled Belt and Road Initiative, which loaned money for infrastructure development in countries Beijing hoped to secure favorable trade deals with. The venture has been marked by late payments, defaults, and a contribution to China’s burgeoning national debt.
TREND FORECAST: China will benefit from Russia’s increasing dependency on it for cross-border trade.
However, doing more business with Russia will not make up for the loss of trade with other countries that are now reshoring or “friendshoring” their supply chains.
China will remain a key player in the global economy, however, because of Beijing launching the COVID War in January 2020 on its Lunar New Year, “The Year of the Rat” and its three years of zero-COVID policy that locked down the nation, it will not play the world’s dominant export role it has played for the last 10 years.
IN CHINA, “GROWTH” IS OUT OF STYLE. “VALUES-BASED LEGITIMACY” IS IN.
“It is glorious to be rich,” Chinese head of state Deng Xiaoping said in the 1980s, launching an era of unbridled growth that had the country in contention to become the world’s strongest economy.
That growth, which created new Chinese middle and upper classes, was the Communist Party’s claim to legitimacy: if the economy was soaring, the party must be doing things right, Arthur Kroeber, founding partner and China specialist at Gavekal Dragonomics, said in a recent lecture.
Now the manufacturing powerhouse that was China through the first two decades of this century has waned. Youth unemployment is at a record high. The property market has crashed and the vibrant consumer economy the government counted on has failed to materialize.
Thanks to Beijing launching the COVID War and its three years of zero-COVID policy which locked down the nation, China’s economy will not return to its former strength for years, if ever.
“There’s a fairly extensive propaganda effort going on to shift away from that old social contract” in which the people give power to the party in exchange for economic success, Kroeber said.
As a result, growth as the validation of the party’s effectiveness is out. Now Beijing has begun emphasizing what Chinese scholar Daniel Bell has called “values-based legitimacy.”
What exactly does that mean?
The party is now casting itself as the guardian of Confucian traditions, including responsibility to others, which is reflected in President Xi Jinping’s call for shared prosperity, and shifting away from capitalist ideals, which are seen as fragmenting society.
“Confidence in one’s own culture” is “the most vital, profound and enduring wellspring of strength for the progress of a country and its people,” Xi’s cabinet said in a public statement earlier this month.
No mention there of growth or wealth.
Xi now regularly emphasizes Chinese culture’s 5,000 years of “indelible contribution” to world civilization, dosed liberally with nationalistic fervor that China now demonstrates by a more assertive presence on the world stage.
“By associating the [party] with this timeline, he creates a narrative that allows rejection of Western-style democracy,” Bloomberg noted.
TREND FORECAST: Beijing knows that the economic future is bleak, thus they will promote more of a communist manifesto to control the population from protesting against declining living standards.
President Xi also has tied the new narrative to his government’s battle against official and corporate corruption, a blight that had spread through previous decades. Some government, and even corporate, officials have been executed; Xi also has accused members of his own inner circle.
“Millions of people have been swept up” in the anti-corruption drive, Bloomberg said.