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Wednesday, 17 June 2020

Hope for the best, plan for the worst (4)

On June 11, the Financial Times reported: "China faces outcry after premier admits 40% of population struggles. Analysts and public question whether Beijing can keep promise to end poverty this year". Hence, the situation in China may even be worse than in USA.

Nikkei Asian Review, 11 June: "There are still some 600 million people earning a medium or low income, or even less, [Chinese Premier Li Keqiang] said. "Their monthly income is barely 1,000 yuan (about $142), not even enough to rent a room in a medium-tier Chinese city."

Improving the above situation is hampered by the fact that China is - once again - a relatively closed economy that exports only some 19.5% of its GDP. The 2018 average export to GDP ratio for 162 countries amounted to some 44%. Under its previous president, Hu Jintao, exports climbed to some 36% in 2006. Source: global economy.

Improving the above situation is also hindered by some other negative sentiments about China: the debt-trap diplomacy of China's Belt and Road Initiative, the coronavirus origins debate, the South China Sea territorial disputes, and Chinese tech companies with military ties (eg, Huawei). The worst might be the ongoing decoupling between US and China (eg, Reuters, my 2020 blog).

Several articles claim that Chinese citizens accept their lack of freedom given the State's promise of economic prosperity (eg, SCMP-2017, NYT-2018, NYT-2020). The flip side of this coin is that continued poverty, amidst economic prosperity for others, will (eventually) trigger political instability (eg, the Xinjiang Uyghur Autonomous Region).

Obviously, the US would be benefitting from political instability in China, like China is enjoying the American mass protests following the death of George Floyd (eg, Guardian). In my view, the American economic decoupling from China is partly related to hurting the Chinese economy, increasing Chinese unemployment, and challenging political stability in China.

Even China realizes that anti-Chinese sentiment is at its highest following the 2019 coronavirus outbreak in Wuhan. Reuters, 4 May 2020: "Internal Chinese report warns Beijing faces Tiananmen-like global backlash over virus".

Slowly, the American decoupling from China is becoming a global decoupling from China. Some examples: delisting companiesrestricting foreign investmenttransfer medicine production, education, real estate and tourism.

SCMP, 18 December 2019: "US-China decoupling would spell the end of globalisation and China’s growth story". The end of globalisation equals the start of a global decline in prosperity and the end of the world as we know it.

It’s the End of the World as We Know It (And I Feel Fine) - 1987 - by REM

Note: all markings (bolditalicunderlining) by LO unless stated otherwise.

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