Hardly a day goes by that we are not treated to one report or another about the Chinese economy. One day the report is about how the Chinese economy will overtake the U.S. economy as the largest in the world in the not-too-distant future. Another day it is that China has already surpassed Japan’s economy as the number two in the world. On still another day it is how the Chinese economy, year after year, grows at the rate of 8%, 9%, 10%. There is no doubt that China exports a great number of the goods it produces. There is no doubt that China has used its income to purchase a great deal of the “paper” of the United States and other nations. What you do not see very often is reporting that the Chinese economy is already experiencing problems and may, in fact, suffer a significant decline if extraordinary steps are not taken by Beijing.
Figures released by the Chinese Government this month appear to be positive overall, but do show a slowing of the country’s economic growth. China’s Gross Domestic Product (GDP) was reported to have grown 9.1% over the past year. Here in the US, with GDP growth of just slightly more than 1%, the 9.1% figure sounds like something for which we would trade in a heartbeat – a so-called no-brainer. The GDP growth figure, though, is only one factor in the daily life of the average Chinese person. The other side of the coin in China is an inflation rate of 6%, the “hidden tax” that all people, rich or poor, pay every day in every store. And like everyone else everywhere, China feels the effects of the drastic slowdowns across Western Europe. Chinese exports to Western Europe in September were reported to be down more than 50% from the August figure, and the Euro Zone has been China’s largest market.
Beyond pure numbers, an important factor in every nation’s economic strength is the allegiance of its people. In strong economies, the average citizen sees the nation as being virtually one with his or her personal goals. In the PRC the spectrum of antipathy toward the government-run economy has spanned the spectrum from outright demonstrations, some of them violent, to a drop in consumer spending that signals a reluctance to trust Beijing, just as a lack of consumer spending in the US reflects an uncertainty over domestic policies.
Perhaps the biggest potential threat to the Chinese economy in the longer term lies in the demographics of its population. For one thing, Beijing’s draconian, centrally directed policies have resulted in a shrinking population growth rate overall by dictating a “One-Child” policy. Because of when that policy was implemented, China presently has an aging population. With increasing age will come an increasing need for health care, just like it does everywhere else. The expectation among the elderly will be that “the state” will pay for their needs and that means the young folks. The imbalance in numbers in the ratio, though, will be daunting to the younger folks faced with higher and higher costs. It is fair to say that China will face a problem very similar to the one the US is presently facing with its Social Security, Medicare, and Medicaid entitlement programs.
Differing opinions will persist as to the strength and durability of the Chinese economy. What also will persist is that the data are a product of The Peoples Republic of China, just like millions of other products and, therefore, are subject to manipulation. In addition, the figures released by Beijing are those that reflect the past, not the future. Keep in mind that right up until the very end, the now-former Soviet Union was viewed as a rock-solid juggernaut and the Kremlin, itself, did absolutely nothing to contradict that image and did everything it could to foster it.
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Frank Hyland is a member of HHH Consultants LLC , a conservative think tank dedicated to helping conservative candidates both in their campaigns and after their election.
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Keep in mind, too, that 17% of every dollar spent on goods from the PRC goes directly to their military. So remember: when you buy cheap, non-durable Chinese goods for your family, you finance Chinese military expansionism.