For decades, the global economy was growing on the backs of the BRICs — China, India, Russia, Brazil, etc. China, in particular, boosted the economies of raw material exporters around the world. High tech exporters such as Germany have also benefited from China’s industrial and technological rise.
But Russia and Brazil suffered when global oil prices fell 5 years ago, and China is showing multiple signs of slowing. If things continue this way, where can the world look for growth stimulus?
China’s Imports Crashing
China’s imports have been worse than sluggish. A drop in imports means that domestic consumption is set to drop and that value added exports are also set to decrease.
Exports out of China have been trending downward over most of 2019. Combined with a stronger drop in imports, the impression one gets is of an accelerating decline in exports and industrial activity in China for the near term.
China is Unsettling
China’s political mechanisms are particularly ham-handed when it comes to popular discontent. Even inside the prison bars of mainland China, astute observers can read troubling signs in the tea leaves. Massive Hong Kong protests cannot help but affect political sentiments in Taiwan and the rest of the overseas Chinese community.
There are hints of divisions in the Chinese leadership and stirrings of discontent about Mr. Xi’s policies….
The tumult in Hong Kong could pose a risk to Mr. Xi, especially if it exacerbates discontent and discord within the Chinese leadership over other issues.
“I think the danger is not that his standing will collapse, but that there is a whole series of slowly unfolding trends that will gradually corrode his position,” said Richard McGregor, a senior fellow at the Lowy Institute in Sydney and author of “Xi Jinping: The Backlash.”
“Hong Kong is one, as the protests look set to carry on despite the concessions,” Mr. McGregor said. “The trade war is adding to the pain,” he added, referring to the current standoff with the United States.
___ NYT quoted in AT
And the global economy is beginning to shift slowly away from an overdependence on an unpredictable China. The trade war between the US and China continues to heat up in the midst of the ongoing protests in Hong Kong and the drop in industrial activity and exports in China. The long-term but accelerating movement of manufacturers and supply chains away from China to other nations suggests more enduring changes.
China is in a more difficult position. Attitudes against it are polarising. Trump picked his moment to declare a trade war – just a time when poorly managed debt diplomacy was exposing the inequity of China’s plans to create its own global trade ecosystem. The fact China is now perceived as a global power makes it easier for the US to contain them – it’s not some poor third world nation they are looking to corral! The next few years will be as much about how China is increasingly contained, as about slowing growth. What the US really wants now is a Great Wall of China to keep them in as trade war morphs to cold-war.
China isn’t going to suffer … economic collapse on US tariffs, but it is sub-optimal and likely to push China growth lower earlier than the party strategists hoped, reducing the likelihood the nation can get rich before it gets old. The implications of a slowing China will be felt across whole globe. If China isn’t growing 6%, then that’s going to slow global growth. It will be felt most obviously in nations like Australia and other primary suppliers, but also elsewhere. ___ Bill Blain via ZH
As China slows, other economies that had depended upon China for their own economic growth will also slow. Watch Australia and Europe closely for signs of China overdependence.
Meanwhile US Jobs Market Continues to Grow
As the US approaches “full employment” we can expect the number of new jobs to slowly taper off. The unemployment rate appears stuck at a very low 3.7%, but one should always keep an eye on business investment and worker participation.
The U.S. job creation machine is still working – 130,000 more jobs last month.
The rate of growth is slowing but overall there’s still strong jobs growth.
The likely reason for the slowing growth is that there just aren’t that many people to employ out there. __
US President Trump created improved conditions for business in the US by reducing crippling regulations and taxes. There is much more room for improvement, and as long as Mr. Trump is president of the US it is likely that more deregulation and tax reform will continue to come from the White House. The more constitutionally oriented federal judges being appointed by Trump should also bolster the rule of law in the US, one very important foundation for business stability. More
Corrupt Global Politicians Too Easily Bought by China
We expect politicians in the third world to be corrupt and easily bought — and they are. But when we see politicians in Europe, Australia, and the US [J. Biden] also being influenced by the flow of Chinese investments and other funds, it seems clear that China has become a global engine of corruption. Given that China’s prosperity came from western foreign investment, western technology transfer, and western banking and trade concessions to China, it is clear that it is up to anyone in the west who can still make a difference to do so. This seems to be at least part of what Mr. Trump is trying to do — slow and mitigate the rot and decline of the west.
It is too early to tell how things will turn out, but China is more brittle than it appears to most international observers.
China can make its successful billionaires disappear, and transfer their wealth to party insiders. More
90% of China’s ultra-wealthy are related to top party officials, and the ones who are not… well, they often disappear if they are unwilling to “gift” most of their wealth to those who are closely related. And their wealth is transferred anyway. These corrupt shenanigans help to fuel much of the capital flight out of China (through Hong Kong channels).
Hope for the best. Prepare for the worst. There are many different ways to make provisions for difficult situations and tighter times. One way is to set aside funds and materials. Another way is to develop skills that will help see you through. Give it some thought.
It is never too late to have a Dangerous Childhood © .
The decline of China can be dated to 2012, when Xi Jinping came to power. Both China’s Xi and Russia’s Putin reinforced each other’s megalomania, much like Hitler and Tojo in the 1930s.