Pessimistic reports and expectations about the Chinese economy poured in, after a series of events last week, including the failure of July results for retail sales and industrial production expectations, high unemployment rates to record levels, and the announcement of bankruptcy by the giant real estate company, Evergrande, in the United States. These events were not the only reason for pessimism about the Chinese economy, but there are a number of other considerations and challenges, such as the failure of growth to meet expectations due to low demand, the fall into debt of Chinese companies and government institutions, declining labor force, and Western restrictions imposed on technology transfer. All of this raised an idea that may not be new, but it was not taken seriously before that, which is that China’s forty-year period of prosperity has ended, and that China will no longer become the engine of global economic growth, and its stumbling blocks in the spring of this year are but a harbinger of a problem. More dangerous in the long run. What are the reasons for China to reach where it is today? How reliable are these reports?
During its growth period, China relied on its labor force, and the Chinese government was able to deal with what everyone saw as a problem, which is the population, turning it into a point of strength, and thus raising its productivity to levels that enabled its economy to grow historically. During this journey, hundreds of millions of Chinese were lifted out of poverty. But China today, for the first time since 1961, is witnessing a decline in population, and this decline was not expected until at least 2029. The United Nations predicted that the Chinese population will continue to decline, reaching 800 million by the end of this century, compared to 1.4 billion now.
For many years, China adopted the one-child system, until the fertility rate reached 1.2 children per woman. In 2021, the government changed this policy from one child to 3 children, but the way of living has now changed in China compared to previous years, as prices have risen a lot in China, which is today one of the most expensive countries in the world to form a family and raise children, and many families prefer a newborn. One, but many of the current generation abstained from procreation. The birth rate has decreased to half of what it was 7 years ago. This trend will make China suffer from future challenges, including what is evident today, which is the decrease in the number of labor force that China was betting on, and also the high life expectancy of the people, which will put pressure in the future on the government to provide social care.
Someone might say that there is a contradiction between the decline in population and the rise in unemployment rates, as it is assumed that job opportunities for young people will increase when the population declines. In fact, the quality of available jobs has become unsuitable for job seekers, as the number of graduates from universities in China this year alone is about 11 million graduates, which is undoubtedly something that counts for China, in which the illiteracy rate in 2000 reached one for every 10 adults. On the other hand, the available jobs do not match the aspirations of these graduates, which is why Chinese leaders criticize young people as not good at manual labor and unwilling to move to the countryside.
Unemployment rates for Chinese between the ages of 16 to 24 reached about 21.3%, which is the highest historically, and after this statistic, the government stopped announcing the data completely, which is a measure commensurate with the nature of the Chinese government, but it certainly does not help it attract foreign investments, which may be one of the important solutions. To support China’s economy in the future, which is certainly not encouraged by the policy of opaque data.
On the other hand, China denounces these reports, and believes that the Western media are exaggerating the problems currently occurring in China for political reasons. The Chinese foreign minister’s response was harsh when he said: “Reality will slap them in the face.” China may have a justification for this response, and the justification is not from Chinese officials alone. The International Monetary Fund expected that China’s growth this year would account for 35% of global growth. This expectation was at the beginning of the year, and nothing has happened in China yet that makes this optimistic expectation overturn. to the current pessimism.
There is no doubt that the West has its own agenda in trying to put pressure on China with these reports, some of which concluded that China’s economic role in the future has been exaggerated, just as the role of Japan was exaggerated in the nineties, and Russia before that in the sixties, when both of them entered into vortexes of deterioration in their economies. It is not possible to judge the future of the Chinese economy from the quarterly results, or from the performance of the real estate sector, even if it is a huge percentage of the Chinese national product. However, one who contemplates the Chinese reality realizes that it suffers from a demographic problem, as the population trend is not commensurate with the current economic model, which calls for new structural reforms in the state that may disrupt China in the short term, but are essential to the continuation of economic prosperity.
2023-08-20 23:07:14
#decline #Chinese #economy
