THE COMMUNIST CHAMPION OF GLOBALISATION AND OPEN MARKETS !
XI Jinping, the dour Communist Party tyrant, who now imposes his will arbitrarily on 1.3 billion Chinese, supported by the other political thugs in the Politburo, graced the World Economic Forum with his presence last week in Switzerland.
Was it a reward for Xi’s further clampdown on dissent in China, and even greater tightening of internet controls, that the IMF accepted the Yuan (or Renminbi) as a main world reserve currency? Apart from internationalising China’s currency, it helped to further the Asian giant’s global dominance in world trade.
However, the Trump threat of substantial import tariffs and a resulting trade war aside, analysts continue to be worried about the real state of the Chinese economy and think that the country is in big trouble. There can be little doubt that the other so-called ‘world’s business and political elite’, with their snouts in the same big money trough at Davos, were given very little opportunity for critical face to face questions with Xi; a pity.
Many believe that China’s GDP figures, and books, are cooked! The ‘consistent’ yearly GDP growth rate of around 7% is increasingly regarded by some with total scepticism. They think that overstating growth is so embedded in the system that useful information on the economy is no longer being provided.
China’s banks are over-burdened with low quality debt. They extended USD1.8 trillion in loans in 2016 as the government encouraged more credit-fuelled stimulus to meet economic growth targets. The explosive hike in debt has to be a major concern.
Overall debt is comparable to other developed economies, but corporate debt at 169% of GDP is regarded as far too high. Furthermore, the overheated housing market, which has depended for so long on easy government money, is well overdue to explode. The effect of that on the slowing economy can only be imagined.
We are told that the long-term plan is to re-structure away from investment-intensive industry towards new ‘growth engines’ in services and technology, but there still seems to be a marked inclination to persist with major infrastructure projects ie roads, railways and airports. Many of these are unnecessary and located in sparsely populated areas. They will of course initially produce more GDP growth but the unproductive investment underpinning GDP targets remains a major problem.
The sombre President Xi must also front the 5-yearly Communist Party Congress due to be held this Autumn, and convince the other Party bosses by then that his reforms are working. A few changes near the top may not be out of the question.
Meanwhile, spare a thought for those former British Chinese citizens still resident in Hong Kong. Their status as UK subjects was ended by our political elite and so conveniently ‘transferred’ in 1997 to end their days under the current communist dictatorship. Many of them had fled to Hong Kong from communist oppression in China years before. Shame on the British government of the time for not striking a better deal for them. These great Chinese people were among the most hard-working and enterprising anywhere. They are owed much.