Posted on Aug 21, 2023
China's economy has deflated. What does it mean in terms of China's expansionism initiatives?
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China began expanding its reach through its OBOR and MSR initiatives. It wanted to drive China across Asia, Europe, Africa and into the Americas. It wanted to control global economies through its preferred loans from its BRICS program. However, the Chinese economy has gone into deflation and consumer confidence at home has taken a dive. European countries are increasingly lowing their reliance on China. How will these changes affect the Chinese initiatives OBOR and MSR?
China
Economy
Posted >1 y ago
Responses: 5
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China’s economic woes will become worldwide. We may not depend on them manufacturing so many products but our own factory orders are declining. I would think that inflation has put the brakes on manufacturing. The destruction of the Nord Stream pipeline has crippled German industry and they are in recession. The downward cycle in my humble opinion is just starting. New vehicle inventories according to Cox Automotive reached its highest level in two years. Layoffs will be the result of slowing
Manufacturing. China is the industrial motor for the world, and any slowdown in trade speaks volumes about here, Europe and the rest of the world. When was the last that time the IMF, International Monetary Fund forgave any loans ? Yes, China May slow on its Belt and Road initiative but the sad part is most of the world is slowing down economically.
Manufacturing. China is the industrial motor for the world, and any slowdown in trade speaks volumes about here, Europe and the rest of the world. When was the last that time the IMF, International Monetary Fund forgave any loans ? Yes, China May slow on its Belt and Road initiative but the sad part is most of the world is slowing down economically.
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CPT Gurinder (Gene) Rana
SGT Stephen Rowland, China is experiencing a deflationary economy which means that consumer confidence at home is tanking. The UK and other EU member countries are reducing their reliance on Chinese goods and services. Hence, the OBOR and the MSR initiatives will be affected. Chinese foreign income will be reduced, as has already been realized this year and will further drop next year. As such, China's economy and expansion aspirations are affected because lending power has dropped.
Looking at Sri Lanka, for example, Indian Oil Corporation has 250 fuel stations operating across Sri Lanka. China loaned Sri Lanka to develop Hambantota Port. The high interest on the Chinese presidential loans couldn't be repaid by Sri Lanka, so China took ownership of Hambantota in Sri Lanka. Today, Indian Oil Corporation has received Sri Lanka's approval to open another 30 fuel stations and China is racing to try and overturn this Government to Government agreement. Indirectly, Sri Lanka has snubbed China. This is how I see it.
The U.S. is also reducing its reliance on China for manufacturing and other services. The U.S. is looking at India as its next hub, perhaps. German vehicle manufacturers have set up assembly hubs in India too. Japan already manufactures cars, SUVs and is involved in joint ventures in India. India is also seen as the alternate Silicon Valley and ISRO the next generation Space Exploration Agency. However, India has a few more wrinkles to iron out for smooth foreign investments. This is not to say that India is it, but India is definitely a favored choice.
Looking at Sri Lanka, for example, Indian Oil Corporation has 250 fuel stations operating across Sri Lanka. China loaned Sri Lanka to develop Hambantota Port. The high interest on the Chinese presidential loans couldn't be repaid by Sri Lanka, so China took ownership of Hambantota in Sri Lanka. Today, Indian Oil Corporation has received Sri Lanka's approval to open another 30 fuel stations and China is racing to try and overturn this Government to Government agreement. Indirectly, Sri Lanka has snubbed China. This is how I see it.
The U.S. is also reducing its reliance on China for manufacturing and other services. The U.S. is looking at India as its next hub, perhaps. German vehicle manufacturers have set up assembly hubs in India too. Japan already manufactures cars, SUVs and is involved in joint ventures in India. India is also seen as the alternate Silicon Valley and ISRO the next generation Space Exploration Agency. However, India has a few more wrinkles to iron out for smooth foreign investments. This is not to say that India is it, but India is definitely a favored choice.
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Suspended Profile
OBOR and MSR are STRATEGIC economic projects for China and are sources of their economic power with huge geopolitical implications for their international standing. China make take a temporary conservative approach to borrowing and lending, and delay some of its domestic infrastructure projects. But China's diplomatic relationships and political leverage will likely sustain international support for OBOR and MSR. Counter to the theories of economic deflationary impact, partner countries are not concerned about China's ability to fulfill its commitments over the LONG-TERM, nor are they likely to worry about the financial viability of joint projects over the long-term.
In the short-term, the impact of Chinese deflation on OBOR and MSR will depend on the severity and duration of the deflationary period, as well as how the Chinese government responds to these economic challenges. If we see China investing more into its domestic economic stabilization, social welfare, and job creation, we should not expect that it would take precedence over overseas expansionist projects. The strategic art is how lop-sided will the Chinese government keep the balance between domestic and international priorities.
In the short-term, the impact of Chinese deflation on OBOR and MSR will depend on the severity and duration of the deflationary period, as well as how the Chinese government responds to these economic challenges. If we see China investing more into its domestic economic stabilization, social welfare, and job creation, we should not expect that it would take precedence over overseas expansionist projects. The strategic art is how lop-sided will the Chinese government keep the balance between domestic and international priorities.
CPT Gurinder (Gene) Rana
I absolutely agree COL Dan Ruder. However, in the short-term foreign lending with be affected I believe.
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I heard an interesting comment about China's failing economy from Ben Shapiro. Primarily due to China's One Child policy that began in the early 1980's and just ended in the mid 2010's, the average age of the Chinese citizen is much higher than other developed countries. Their population is shrinking with increasingly older citizens and fewer younger ones to support them. Generally, civilizations population by age needs to be shaped like a pyramid with the smallest population being the elderly and the largest population being the young. A self replacement rate for society needs to be 2.1 or greater... China's is 1.15 (an average Chinese couple is averaging only 1.15 children for every 2 adults) . The younger working class pay into the system that supports the smaller older population. China's age demographic is inverting, largely because of their One Child policy. They are now presented with the difficult challenge of supporting the ever increasing older population with much fewer income earning younger people.
The USA is experiencing a similar crisis, but it is primarily because the younger generations do not wish to be married or have children or identify as LBGT and therefore do not reproduce. The USA replacement rate is around 1.7. This is already affecting Social Security. My most recent statement said that I could only plan on receiving about 80% of my calculated benefit after 2034. There are less income earners now to support the Baby Boomer generation that is retiring now.
The USA is experiencing a similar crisis, but it is primarily because the younger generations do not wish to be married or have children or identify as LBGT and therefore do not reproduce. The USA replacement rate is around 1.7. This is already affecting Social Security. My most recent statement said that I could only plan on receiving about 80% of my calculated benefit after 2034. There are less income earners now to support the Baby Boomer generation that is retiring now.
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CPT Gurinder (Gene) Rana
Very interesting statistics SFC James Smith.
If China demographics are inverted then, it will be tough for China to sustain a young and agile military force, I would imagine.
If China demographics are inverted then, it will be tough for China to sustain a young and agile military force, I would imagine.
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