Opinion: Has China Lost Its Steam?

China is poised to replace the US as the economic superpower but with problems stemming from a weak economic growth to domestic unhappiness, the road is not a walk in a park.

Oct 25, 2022 | By Michel Santi

No one dares to claim that China will soon become the world’s largest economy. Starting with Goldman Sachs’ announcement 15 years ago that the Middle Kingdom would be number one by 2026, to Nomura’s prediction by 2028 and JP Morgan’s by 2031, the question was not so much if the country would take the spot but when would the US economy be supplanted in its pole position. The prospect now seems very uncertain — no longer relevant at all in fact — as the cards have been reshuffled in recent months, this fundamentally calling into question all the parameters.

Right from the outset, one would take notice of the world’s happenings: while all the central banks are raising their interest rates, China is the only major economy that is lowering them. The Chinese authorities can no longer hide the gap that is increasing with the US. According to calculations made by the formal head of the World Bank, Bert Hofman, the former is at around US$5.3 trillion against US$8.3 trillion of the latter. China’s low inflation and weak national growth, coupled with an inferior Yuan and a strong greenback, its economy is in recession when the parameters are expressed in dollars. It can no longer lay claim to being the Asian powerhouse because, for the first time in 25 years, the growth of Indonesia, Malaysia, the Philippines and Vietnam exceeds that of China.

Despite the slew of demerits points, China’s Xi Jinping remains relentless in declaring that the East would very soon overtake a declining West, and hammer home that his country is on the point of outclassing the US. As seen from the inside, the recent closure of the 20th Communist Party congress is resounding proof of his absolute control and mainly due to his “anti-corruption campaign”, which he purged his opponents along with those who doubted his governance. After 30 years of tremendous growth that is unheard of in the world, the system put in place by Deng Xiaoping has now been rendered obsolete by Xi as he is now unmatched due to his cult following that rivals that of the Mao era.

Under Xi’s governance, the party favours loyalty over merit and this alienated the distinguished talents across the country as it has suppressed all criticism and human errors. But this has cultivated disastrous consequences as the real estate market is on the brink of collapse; the witch hunt against the country’s technological giants like Alibaba and Tencent curtails technological advancement; and the incredible stubbornness to pursue zero-Covid with totalitarian surveillance along with over-encroaching Hong Kong have damaged its reputation and economic progress. But what is this was Xi’s plan to fundamentally change Chinese society?

Michel Santi

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