Xi Jinping, leader of the People's Republic of China / Source: U.S. Department of State/ Wikimedia Commonsinto the world's second economical power. large investments and technological advances were awesome among abroad observers. However, China has late developed increasingly worrying economical signals. Why is the current economical model of the PRC not working so well? How will China's economical downturn affect their policies? How can Poland find itself in this situation?
For the past 50 years, the People's Republic of China has become a symbol of dynamic economical development. Thousands of miles of fresh roads and railway lines have linked the country's farthest reaches to the outside world. Millions of people moved from the village to the cities, and global corporations massively moved their plants to China. The country began to be referred to as the planet Factory. The Chinese authorities have ensured that as many native companies would be established in their territory capable of competing with Western companies in abroad markets. Chinese scientists amazed the planet with fresh discoveries. It was widely thought that China's power could only grow and the United States is doomed to resign from the PRC as the world's first economy.
20% of young Chinese unemployed
In late 2019, however, the Covid 19 pandemic began in the city of Wuhan in central China, which shook the planet and disrupted the economies of most countries. For many months China maintained the Zero Covid strategy, which required mass population investigating and long-term lockdowns paralyzing key economical sectors and disrupting global supply chains. As a consequence of the force of street protests, the leader of the PRC, XI Jinping, decided in December 2022 to loosen the policy of combating the pandemic, which gave hope for a solid reflection of the Chinese economy, which would improve the global economy.
Unfortunately, economical data flowing from China are worrying in global markets. The post-pandemic reflection of the economy was weaker than expected. There is more and more talk about China entering stagnation. In August, the Chinese authorities resigned from the publication of unemployment data including age groups, erstwhile in June the youth unemployment rate (16-24 years) of city residents reached a evidence of 21.3%. GDP growth in the second 4th of this year only reached 0.8%. In spite of the requests made by the Chinese authorities, they are saving on consumption, which was to be the foundation of the economical growth of the PRC. For the public accustomed to news of economical success China's information can be a surprise. Today, both China's home policy and their relations with many countries of the Indo-Pacific region and Western countries, including Poland, are being questioned.
We asked for a comment from prof. Bogdan Góralczyk, a renowned Sinologist and expert in global relations with the University of Warsaw and the erstwhile Polish Ambassador to Thailand.
The prof. emphasizes that since 2016, Xi Jinping, Secretary-General of the Communist organization of China and president of the People's Republic of China has led to a return in economical policy. China's leader began implementing the economical model, which is based on the concept of "double circulation", which is to base China's economical growth on strengthening the interior marketplace and consumption. These measures were only to be supported by successes in external markets. However, the model encountered serious difficulties in the form of the Covid 19 pandemic and long-term lockdowns consistent with the "zero tolerance for Covid" policy, which for many months in authoritative organization messages was presented as a liable alternate to the chaotic alternating policy of mitigating and tightening the pandemic restrictions in the West. As a consequence of protests and increasing discontent in society, Chinese authorities softened pandemic policy in December 2022, but this failed to repair the harm to the economy.
Many of the problems of the Chinese economy are, according to prof. Góralczyk, caused by the characteristics of China's Communist Party's improvement model, inter alia, by "returning to centralization and promoting the public sector, at the expense of private (i.e. limiting the market), political intervention in the market, and above all public concerns about the future", which discourage Chinese citizens from spending money on consumption. Many experts believe that strengthening the function of the ruling party's cells within economical operators and state structures can lead to little economically rational decisions. An example of this phenomenon is the People's Bank of China, whose president, Mr. Gonsheng, is besides the head of organization structures in this institution.
Problems among developers
A peculiar concern among economists is the Chinese real property market, until late the flywheel of the economy generating about 1/3 of GDP. The second largest Chinese developer, the Evergrande Group, has been experiencing financial difficulties since 2021, and in August of that year she filed for bankruptcy in fresh York City. Evergrande's CEO, Hui Ka Yan, was detained by the Chinese police in early October, and the company's stock trading was halted.
Other leading developers besides have financial problems that translate into the condition of banks from provincial centres in China. prof. Góralczyk points out that “over the years and even decades, the improvement marketplace in China grew virtually like yeast, and the basic mechanics was that local authorities cheaply took over the land and donated it, with large profits, to developers. In this way, the economy was driven, which the authorities liked, but at the same time immense debts (even according to authoritative figures above 300 percent GDP) were driven." The problem of the Chinese real property marketplace has been symbolized by large settlements, which stay uninhabited for many years after the construction, which, according to experts, is simply a manifestation of a bubble that threatens China's economy.
Will the crisis in China affect Poland?
Economic slowdown may lead to increased tensions in Chinese interior policy, which prof. Góralczyk believes will be reinforced by political factors and structural problems of China, with an expanding demographic crisis at the head. The centralization of power by Xi Jinping, combating rival factions within the organization and strengthening the ruling influence on private economical operators can make China is more delicate to negative economical factors, including expanding force from Western countries as well as interior unrest.
The current economical problems will most likely not bring China to an end with the United States' global primacy. The concerns of experts proceed to rise Chinese ambitions of Taiwan's integration into its country and to dominate the crucial planet trade in the South China Sea. However, China is the second planet power and it will be hard to solve global problems, including global warming, without cooperation with this country.
China is inactive curious in economical expansion in Europe, including Poland. According to prof. Góralczyk, “they are an crucial supplier of goods for Poland. They want to proceed to enter Europe and invest and sale here. It depends more on the Polish side how to cooperate with China. Undoubtedly, the war in Ukraine is not conducive to this relationship." The challenge for our country in the coming years will be the education of relations with China, which will take into account both China's function in our trade and the geopolitical interests of our allies, including the United States. Only in the coming months will we see whether the economy of our country, affected by the chronic problem of inflation, will be able to cope with the effects of the Chinese economical downturn.
Oskar KMAK
