China’s National People’s Congress did not enact a growth target in May 2020, for instance – the first time.
There are three times as many external debts as the country has. Beijing increased its lending to the financial sector by $2 trillion after the global financial crisis of 2008. The average Chinese family invests 40% of its wealth in real estate, which is borrowed merrily by their households.
Chinese debt became the highest in history in less than a decade. As a result of Chinese government spending that has been unrestrained, there is overcapacity in metals, cement, and other industries; apartment complexes that are empty; and infrastructures that are seldom used.
Local governments and state-owned companies were hiding debt on their books, economists had warned. Chinese hidden government debt has now exceeded half of the country’s economic output, according to Goldman Sachs in its September 2021 assessment. The biggest property developer in China, Evergrande, is sinking due to high levels of debt. With over $305 billion in debt, Evergrande borrowed to build.
Growing Social Unrest
Chinese national wealth belongs to an elite one percent that owns 70 percent (compared to everyone else’s 50 percent). According to estimates from World Bank 2021, China is one of the most unequal major economies. The slogan “get rich is glorious” of Deng Xiaoping produced a form of patronage capitalism in which government officials provided the umbrella and businesses provided the labor.
The Chinese government has forbidden kids from copying the actions and behaviors of celebrities on television, in movies, and online. As China’s economy has grown, the Leninist leadership is seeking to maintain control over a society that has become more social, thus turning a system that praised success into one that worships money.
Collapsed Demography & Debt Crisis
Regardless of where a country/region is going, demographics play a substantial role in its long-term growth rate. Studies in Europe and Japan show that economic and political stresses increase as the median age rises. Population growth and productivity growth are the two factors that determine any country’s potential GDP growth.
China’s elderly population will more than double from 15 percent in 2020 to 33 percent in 2050 (India’s elderly population will rise from 5.6 percent to 14.2 percent, and the US will rise from 14.6 percent to 23.2%). Health, social welfare, and pension costs will be enormous, while the savings rate will decline. In the coming years, China will grow old before reaching the level of rich countries like the United States, Singapore, and Japan.
Many resource-rich countries in desperate need of cash took advantage of the Chinese government’s generosity. In return for China’s domestic overcapacity, it found overseas profitable outlets worldwide and employment for its millions of workers. Loans to China were made at extortionate interest rates together with off-book loans.
Throughout the 1980s and 1990s, Africa experienced a sovereign debt crisis resulting from uncontrolled lending from the West. Suddenly, the Dragon appears with an open cheque book, telling you you can take as much money as you want for your project (including for your family), with no due diligence, no income checks, and no conditions. No worries if you can’t repay, because the Dragon will take your land, your clothes, and your house!
Ask Srilanka! Ask Tajikistan!
The October 2021 report by Aid Data suggests that dozens of countries owe $400 billion to China off-the-books, and 42 countries owe more than 10 percent of their GDP to the Dragon. An Aid Data report from October 2021 claims that 42 countries owe more than 10 percent of their GDP to China, and dozens of countries owe $400 billion. The Chinese lent recklessly, and are now trapped in a “credit trap” because most of their loans have gone to debt-stressed countries. Those loans have no return.
Slowing Industrial Activity & Agriculture Collapse
Following up on ‘Operation Empty Plate’ in 2013, China has embarked on the Clean Plates Campaign to end food waste in 2021. China may be facing a food crisis based on Xi’s approach. Approximately 17-18 million tons of food are wasted by the Chinese every year, enough to feed 50 million people. Food waste is reported by restaurants. A Chinese custom is to serve lavish hospitality, even though diners are supposed to order one dish less than the number of people.
Only seven percent of global arable land is cultivated in China, so feeding 20 percent of the world’s population represents a significant challenge. While it has attempted to lease agricultural land in Africa, no country has been ready for it since colonial expropriation took place. Food prices have risen a great deal in one year; barley, corn, sorghum, and wheat imports have tripled in a year.
As early as 2005, former-Premier Wen Jiabao said water scarcity threatened China’s survival. As a result of climate change and inefficient water management, China has one-quarter of the world’s available water per capita and is the world’s second-largest chemical fertilizer user per hectare. China’s rivers have disappeared in over half since 2000, according to government figures!
Government officials always blame climate change and statistical mistakes. It was the first time in Nigeria’s history that four months of drought occurred. In a recent Greenpeace study, the organization predicts that China’s water consumption will exceed its supply by 2030 when the glaciers reach their “peak water”. In recent years, massive floods have ravaged the nation as a result of climate change.
With its agreement to withdraw from some areas in August 2021 and its frequent changes in force commanders along the border between India and Tibet, China is unwittingly conceding its weakness. Due to the difficulties of fighting at high altitudes, its underpaid and unwilling conscripts are provided with accommodations and meals of the highest quality.
Chinese generals have been reported to regret not fighting wars after they retire. China’s military is its most vulnerable sector. In addition to an obsolete command system, rampant corruption, and training of debatable realism, the PLA faces many other concerns.
China’s template for domestic distraction is to engage in external aggression. More than 50 million Chinese died in Mao’s Great Leap Forward, and so he attacked India in 1962. In 1969, he fought the Soviet Union due to the cultural revolution in China. He attacked Vietnam in 1979 because Mao’s widow led the Gang of Four. Xi attacked India in 2020 as China faltered on both domestic and international fronts. If it does not change its ways, China’s dream of becoming a superpower will all but disappear.
Edited by Anupama Roy