Why China’s Economy Continues to Survive

Commentary China’s economy continues to survive despite major obstacles, including the real estate bubble and the trade war with the United States. Ironically, China’s trade ties with the United States has been sustaining its economy—America’s dependence on Chinese goods. Despite the debate in Washington about decoupling from China and the Biden administration’s decision to keep most of the Trump-era tariffs (at least for now), the United States still wants to maintain trade relations with China. China’s GDP Growth Rate Can’t Be Trusted The Wall Street Journal’s Nathaniel Taplin recently wrote about China’s economic troubles. According to the author, the three pillars that support Chinese economic growth—real estate investment, consumer spending, and exports—are all “shaky” and the outlook for 2022 remains uncertain. Taplin listed four factors that have recently tapered China’s economic growth: the property debt fiasco, Delta variant outbreak, power outages, and snarled shipping lanes. He then wrote, “Sharply weaker growth last quarter at 4.9% from a year earlier was expected.” From my own observation, however, China’s GDP growth rate has always been anything but trustworthy, mainly because it’s highly manipulated by the Chinese regime. I wouldn’t count on the veracity of any reports from the World Bank or IMF on China’s economy, either. For one thing, their China reports are often generated with data that come directly from Beijing. A recent scandal involving IMF Managing Director Kristalina Georgieva, who allegedly pressured the World Bank staff to improve China’s ranking in the “Doing Business” report, is a case in point. World Bank Chief Executive Officer Kristalina Georgieva speaks at the annual session of China Development Forum (CDF) 2018 at the Diaoyutai State Guesthouse in Beijing, China, on March 25, 2018. (Jason Lee/Reuters) US Consumers Heavily Rely on Chinese Goods Amid the pandemic, the United States is currently caught in a supply chain crisis—its ports seriously congested, hundreds of thousands of containers backlogged off the ports, and many stores stricken with a shortage of goods or even empty shelves. Now many Americans are waking up to reality. China and the United States have long shared an international commodity supply chain—China is the supplier of goods that Americans buy. The world’s two largest economies have an interdependent relationship. No matter how you look it, the fact is that U.S. consumers still need “Made in China” products—that’s really what drives China’s economy. According to data from China’s customs agency, from January to August 2021, China’s total import and export value was $3.83 trillion, a year-on-year increase of 34.2 percent; the trade surplus was $362.49 billion, a year-on-year increase of 28.9 percent. The ASEAN, the European Union, the United States, and Japan are China’s first-, second-, third-, and fourth-largest trading partners, respectively, according to official data. China had a trade surplus with all but Japan—a surplus of $57.34 billion with ASEAN, and another $117.82 billion with the EU. The total China-U.S. trade was $477.8 billion, with China’s exports to the United States at $358.8 billion. China received a massive surplus of $241.2 billion. What’s interesting is that despite the U.S. trade tariffs, China continues to enjoy the largest trade surplus with the United States—a figure that’s far more than what it gets from all its trading blocs and countries combined. The U.S. data looks slightly different, but shows the same trend: China’s exports to the United State are staying strong, even with the heightened tensions between the two nations. Since the 1990s, the relationship between the United States and China has in fact been dominated by a steady inflow of U.S. capital and the rapid expansion of bilateral trade. Although there have been political bumps along the way due to the fundamental differences between the two countries on universal values and human rights issues, their economic ties have become increasingly closer. Owing to China’s comparative cost advantage, the U.S. domestic manufacturing industry has been hollowed out over the last three decades, resulting in a stable international commodity supply chain between the United States and China. The current supply chain crisis in the United States stems from the heavy dependence on China’s manufacturing. According to a report by MForesight, an American manufacturing think tank, “in many industries, China has successfully created unsurpassed ecosystems of industrial production encompassing the entire value chain from raw materials to final product.” The report warned that as many American companies invest in overseas R&D, offshore production in advanced manufacturing has reached a tipping point, and the “invent here, make there” strategy has become “invent there, make there.” A cargo ship moves toward the Bayonne Bridge as it heads into port in Bayonne, New Jerse

Why China’s Economy Continues to Survive

Commentary

China’s economy continues to survive despite major obstacles, including the real estate bubble and the trade war with the United States. Ironically, China’s trade ties with the United States has been sustaining its economy—America’s dependence on Chinese goods.

Despite the debate in Washington about decoupling from China and the Biden administration’s decision to keep most of the Trump-era tariffs (at least for now), the United States still wants to maintain trade relations with China.

China’s GDP Growth Rate Can’t Be Trusted

The Wall Street Journal’s Nathaniel Taplin recently wrote about China’s economic troubles. According to the author, the three pillars that support Chinese economic growth—real estate investment, consumer spending, and exports—are all “shaky” and the outlook for 2022 remains uncertain.

Taplin listed four factors that have recently tapered China’s economic growth: the property debt fiasco, Delta variant outbreak, power outages, and snarled shipping lanes.

He then wrote, “Sharply weaker growth last quarter at 4.9% from a year earlier was expected.”

From my own observation, however, China’s GDP growth rate has always been anything but trustworthy, mainly because it’s highly manipulated by the Chinese regime. I wouldn’t count on the veracity of any reports from the World Bank or IMF on China’s economy, either. For one thing, their China reports are often generated with data that come directly from Beijing. A recent scandal involving IMF Managing Director Kristalina Georgieva, who allegedly pressured the World Bank staff to improve China’s ranking in the “Doing Business” report, is a case in point.

Kristalina-Georgieva
World Bank Chief Executive Officer Kristalina Georgieva speaks at the annual session of China Development Forum (CDF) 2018 at the Diaoyutai State Guesthouse in Beijing, China, on March 25, 2018. (Jason Lee/Reuters)

US Consumers Heavily Rely on Chinese Goods

Amid the pandemic, the United States is currently caught in a supply chain crisis—its ports seriously congested, hundreds of thousands of containers backlogged off the ports, and many stores stricken with a shortage of goods or even empty shelves. Now many Americans are waking up to reality. China and the United States have long shared an international commodity supply chain—China is the supplier of goods that Americans buy. The world’s two largest economies have an interdependent relationship.

No matter how you look it, the fact is that U.S. consumers still need “Made in China” products—that’s really what drives China’s economy.

According to data from China’s customs agency, from January to August 2021, China’s total import and export value was $3.83 trillion, a year-on-year increase of 34.2 percent; the trade surplus was $362.49 billion, a year-on-year increase of 28.9 percent.

The ASEAN, the European Union, the United States, and Japan are China’s first-, second-, third-, and fourth-largest trading partners, respectively, according to official data. China had a trade surplus with all but Japan—a surplus of $57.34 billion with ASEAN, and another $117.82 billion with the EU.

The total China-U.S. trade was $477.8 billion, with China’s exports to the United States at $358.8 billion. China received a massive surplus of $241.2 billion.

What’s interesting is that despite the U.S. trade tariffs, China continues to enjoy the largest trade surplus with the United States—a figure that’s far more than what it gets from all its trading blocs and countries combined.

The U.S. data looks slightly different, but shows the same trend: China’s exports to the United State are staying strong, even with the heightened tensions between the two nations.

Since the 1990s, the relationship between the United States and China has in fact been dominated by a steady inflow of U.S. capital and the rapid expansion of bilateral trade. Although there have been political bumps along the way due to the fundamental differences between the two countries on universal values and human rights issues, their economic ties have become increasingly closer. Owing to China’s comparative cost advantage, the U.S. domestic manufacturing industry has been hollowed out over the last three decades, resulting in a stable international commodity supply chain between the United States and China.

The current supply chain crisis in the United States stems from the heavy dependence on China’s manufacturing. According to a report by MForesight, an American manufacturing think tank, “in many industries, China has successfully created unsurpassed ecosystems of industrial production encompassing the entire value chain from raw materials to final product.”

The report warned that as many American companies invest in overseas R&D, offshore production in advanced manufacturing has reached a tipping point, and the “invent here, make there” strategy has become “invent there, make there.”

Epoch Times Photo
A cargo ship moves toward the Bayonne Bridge as it heads into port in Bayonne, New Jersey on Oct. 13, 2021. (Spencer Platt/Getty Images)

Over the years, I have seen a lot of articles trying to foretell a boom or crash for China’s economy. As I have always argued, China’s economy has never been as prosperous as many Western investment bankers have predicted, because Chinese authorities have often made very short-sighted decisions in order to speed up development. Thus, hidden dangers are bound to emerge following a brief prosperity, as we see the current debt crisis unfolding in China’s real estate industry.

However, China’s economy will not collapse in an instant. As the current state of U.S.-China trade shows, Chinese manufacturing needs the U.S. market, and vice versa. This strong U.S. demand has provided the Chinese economy with the strength it needs. Capital always follows profits closely and the U.S. business community doesn’t intend to abandon the lucrative Chinese market anytime soon. This is why the Chinese economy has survived and will continue to do so for some time, despite all the crises it’s faced.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.


He Qinglian

Follow

He Qinglian is a prominent Chinese author and economist. Currently based in the United States, she authored “China’s Pitfalls,” which concerns corruption in China’s economic reform of the 1990s, and “The Fog of Censorship: Media Control in China,” which addresses the manipulation and restriction of the press. She regularly writes on contemporary Chinese social and economic issues.