China’s economic troubles

By Christopher Harper

As business and political leaders descend on Davos, Switzerland, for the four-day World Economic Summit, Chinese President Xi faces a variety of problems.

Although the press has questioned the gains made by the United States in the first round of a trade deal with China, it’s clear that President Trump made significant inroads.

Under the deal, China agreed to buy an additional $200 billion in American goods over the next two years. The agreement protects U.S. intellectual property, addresses technology transfers, and ends currency manipulation by the Chinese.

It would be premature to applaud the deal UNTIL the Chinese meet these goals, but these steps are the most significant in the history of trade between the two countries.

Noted Chinese expert and author Michael Pillsbury dismissed the attacks on the deal, calling it a “historic agreement.”

He criticized the Democrats. “They said all the things that President Trump said today, but they couldn’t get it done. They didn’t have a strategy on how to bring the Chinese leadership around. Now I’m afraid they’re a little bitter and even embarrassed. Their own ideas have been implemented by Donald Trump, and they can’t stand it.”

Although the deal may help Xi and the economy, the Chinese president faces other financial issues. 

As The Wall Street Journal notes, Xi’s domestic economic policies have stumbled. “He has appeared to choose political reliability over profits and efficiency as he throws his support behind government-owned businesses in the form of subsidies, financing, licenses, and pressure on competitors. Bankruptcies are running higher than ever in China among private companies, which suddenly have less scope to expand,” James T. Areddy writes from Shanghai.

During my travels throughout China during the past five years, I have noticed a growing disparity between the growing middle and upper classes in the cities and the crushing poverty of the countryside, particularly in minority areas. It’s true that the countryside has made gains in the past 20 years, but these are far less dramatic than among the urban elites. 

Furthermore, the much-touted Belt and Road Initiative has hit some significant resistance aboard. One of the features of the initiative was to provide jobs to the Chinese building sector, which faced fewer projects inside the country. Now the international building program faces growing concerns that the developing countries where projects are centered will see mounting debt to finance the programs. That means fewer jobs for Chinese workers outside the country. 

President Xi isn’t likely to face any serious challenges from inside the Communist Party. Still, the international community will note how his once-gleaming economic acumen has lost much of its luster. 

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