China’s economy is in a nosedive and is a “ticking timebomb,” President Joe Biden said.
“That’s not good because when bad folks have problems, they do bad things,” Biden said at a political fundraiser in Utah.
Biden continued, “China is in trouble. China was growing at 8% a year to maintain growth. Now close to 2% a year.”
China’s economy has fallen into a period of deflation. Its consumer price index (CPI) fell by .3% in July. Its imports and exports fell sharper than expected last month. Tesla triggered a price war in China by cutting prices.
“There is an expectation that this will add pressure to policymakers to deliver stimulus though so far measures have been cautious,” Elsa Lignos, the global head of FX strategy at the investment bank RBC Capital Markets, told The Guardian.
U.S., Chinese Economy Intertwined
Scheherazade Rehman, a professor of international finance at George Washington University, warns that the U.S. economy is so intertwined with the Chinese economy that a downturn will result domestic economic repercussions in the U.S.
She notes that the American tariffs on Chinese goods imposed by the Trump administration and continued under Biden have contributed to the slowdown of the Chinese economy.
“There is nothing good here with this and China slowing down and doing this on top of it, and keeping the Trump-era tariffs on top of that — all of this is not boding well for us,” she told the Washington Examiner.
Youth unemployment in China among those 16-24 is now over 21%. In 2020, the Chinese government harmed its economy by cracking down on housing prices, which resulted in a collapse of prices and led to the default of several real estate companies.
“And this construction market and mortgage market and housing market has not recovered. If anything, it looks bad,” Rehman said.
If China reduces energy imports it could translate it could harm American energy producers across the board. The same is true when it comes to the U.S. agricultural sector because China is the largest consumer of American agricultural products.
Biden’s order barring in high-tech investments in China due to its diversion of technology to benefit its military infrastructure likely will also slow China’s economy.
“This relationship is so symbiotic that anytime you try to squeeze your partner, it will end up reverberating back on you,” Rehman noted.
Chinese Economic Downturn Could Lead to Military Adventurism
China’s economic downturn could spur Beijing to become more aggressive toward Taiwan and its neighbors, analysts fear.
“Foreign demand is falling because Western nations want to disengage their economies from China out of fear of major economic problems should China attempt to bring Taiwan under mainland control by force or should Chinese claims on waters in the South China Sea lead to confrontation. Russia’s invasion of Ukraine has been a lesson to the world about how unpredictable authoritarian governments can be,” Northeastern University Professor William Dickens said.
He worries about a wag-the-dog phenomenon that could become a bigger threat to the U.S. than an economic problem.
A report by the Council on Foreign Relations agrees with the assessment.
“As China’s economic growth has slowed under Xi, he has increasingly turned to nationalism to justify the [Chinese Communist Party’s] monopoly on power. With a further downturn, he could turn to the Taiwan issue to rally support for the CCP and his personal rule,” the report said. “As Xi approaches the end of his tenure and looks toward his legacy, the risk of a conflict over Taiwan will grow.”
John Rossomando is a defense and counterterrorism analyst and served as Senior Analyst for Counterterrorism at The Investigative Project on Terrorism for eight years. His work has been featured in numerous publications such as The American Thinker, The National Interest, National Review Online, Daily Wire, Red Alert Politics, CNSNews.com, The Daily Caller, Human Events, Newsmax, The American Spectator, TownHall.com, and Crisis Magazine. He also served as senior managing editor of The Bulletin, a 100,000-circulation daily newspaper in Philadelphia, and received the Pennsylvania Associated Press Managing Editors first-place award for his reporting.
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