The China Syndrome
Struggle Sessions Continue
China ends 2023 with Geopolitical Gains but Economic Losses
Xi Jinping had a very good year internationally in 2023, which marked his post-Covid return to the global stage. He was able to stave off widening US sanctions due to his alliance with Putin, and he mended fences with the Biden Administration in San Francisco after the balloon incident.
However today, on the last day of the year in Beijing, weaker than expected economic results were reported. According to Bloomberg, the official manufacturing purchasing managers index (PMI) declined to 49, below forecasts and in contractionary territory.
New factory orders and export orders also declined. This has prompted speculation that the People’s Bank of China (PBOC) will cut rates, but the problem is far deeper than that. If demand falls, businesses will defer loans intended to fuel growth regardless of rates. Badly needed reforms have been delayed for the past decade and the process is unlikely to resume. The focus has completely shifted to anti-corruption campaigns, which is not the same thing as institution building. At the heart of it all is lack of consumer confidence, which links to political confidence and corporate governance. The negative wealth effects of a struggling stock market and a shambolic real estate sector continue apace with no end in sight for Chinese consumers.