China’s Economic Crisis (An Excerpt)
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Recent decades have been characterized by the slowly declining influence of the United States and the long-anticipated rise of China to superpower status. China’s rapid economic growth since the enactment of market-oriented reforms in 1978 has lifted more than 850 million Chinese out of extreme poverty, built an enormous export-oriented economy, and driven average Chinese incomes up (World Bank). Yet recent drops in GDP (Gross Domestic Product) growth point towards a slowing export sector and an unfavorable geopolitical situation (World Bank). Rising wages and a severe demographic crisis are putting immense pressure on China’s export-oriented economy, which relies heavily on cheap labor. External pressures are also mounting on China’s economy; now more than ever, the West sees China’s growth as a threat. The Chinese export economy suffers from renewed hostility, trade wars, and even suspicion over the COVID-19 pandemic’s origin. All of these discouraging factors beg the question: what can China do about its economy? The reality is that the country has only one option: to place emphasis on domestic consumption and to shrink the export industries. This would transition the country’s economy closer to those of wealthy importers, such as the United States. However, increasing domestic consumption necessitates a stronger, wealthier middle class and more support for businesses; it requires freer financial institutions. Lastly, China needs a cutting-edge innovation sector that can compete with other global producers. Yet China’s authoritarian system, which suffers from wasteful government spending, corrupt elite interests, and impediments to technological growth, will most likely prevent all endeavors from transitioning to a domestic consumption economy. The Decline of the Export Economy China’s economic model is extremely unique. The term that describes China best, ‘state capitalism,’ appears to be an oxymoron. The authoritarian central government coexists with a thriving market economy, a combination that appears to possess the best of two worlds: capitalist productivity and authoritarian supervision. Instead of following the Western liberal model, China believes that it has carved a new path to success. Furthermore, the country markets its state capitalism as a viable and attractive alternative to democratic capitalism. The only proof China needs is its existence: it is one of the world’s largest economies, and its sphere of influence grows as each day passes. The Chinese Communist Party, or the CCP, has virtually complete control of the Chinese government. The CCP maintains its legitimacy by ensuring economic growth, which placates the Chinese population to some extent. Therefore, one of the CCP’s highest priorities is to continue economic growth and to avoid stagnation. However, in recent years China’s economy has experienced a notable slowdown. China’s GDP growth had averaged about 10 percent for many decades; in past years, annual GDP growth has slowed from a peak of 14 percent in 2004 to a low of just 6 percent in 2019 (World Bank).
