China Crunch

China became the centre of the globalised supply China and the defacto factory for the entire world. In a couple of decades, the country saw rapid industrialisation and the goal of lifting individuals from poverty. Compared to the horrors of the Mao days, modern China seemed to be heading the right direction, and with a growing middle class and more economic activity, it seemed like the country might also see an increase in freedoms. That direction, however, was not towards freedom but towards power. This place seemed only to be increasing with connections across the entire world and economic dominance that only seemed to be rising as rivals fell apart. Before Covid, due to political choices, this saw some shaking of the dominance yet Covid19 has added a considerable strain to the Chinese system and shaken the Chinese vision for the future that has been expected since the change in style from Mao.

Currency Control Becoming Untenable:
An increasing number of reports and also a video of bank runs in China have been reaching the outside world. This is due to concerns that the banks do not have enough money or that corruption has taken peoples money. The outflow of Chinese currency has been something that China has fought since the modernisation, and in the past decade has seen an increased effort. Even foreign money has been prevented from leaving the country with a decent amount of firms finding that their profits have become trapped in the nation. This has seen reinvestment within the nation although the funds originally have become trapped outside of the nations that they were created in.

The way that Communist China keeps control of the currency is due to an elaborate system that means that the Chinese government controls the exchanges that its currencies have been run at. This means that the Chinese government will pay anyone who wants to exchange out. Therefore this keeps the downward pressure on the value. However, the expense for this has been growing with the dollar reserves of the nation getting much lower. Pressure from the US due to actions in Hong Kong and other regions has seen the supply of US dollars become much harder. Hong Kong served as the bridge to the West however, since the crackdown on independence this tie has become destroyed. The impacts of this are starting to be felt with a chance of payment of USD bonds to fail with a possible meltdown of Chinese financial systems following this.

Export Expectations Collapse

Western economies before Covid19 had been changing from the ones that had powered the early Chinese economy. Decreasing Foreign Middle class consumption was not met with an increase in consumption by internal customers. This has been something that the party has been trying to address for quite some time yet has not yet managed to solve this. Disruption by technology was already causing concern. However, the entire foreign market has shrunk since Covid19 and protectionism and nationalism is a growing force around the world. Even in the EU, an increasing restriction of Chinese goods is being made.

With new laws and growing concerns about the situations in numerous regions doing business in China is becoming harder to justify. Many American companies are being demanded to reduce business if they seek to keep US government/defence contracts. National security laws around the world increasingly are blocking Chinese projects. This can be seen with the new 5g technology and other products that would have funded the growing Chinese tech industry.

What had once been an expected part of the world is having the possibility of failure. Chinese toxic party has driven nationalism, and hostile direction is turning away allies and forcing coalitions against it. The rush towards constant growth and the reliance on the free trade it is undermining place pressure on a country that has found its progression increasingly easy. How the Communist Party of China handles this is unknown. Perhaps like the earlier party, they will remove the power of one individual and move away from government control.

Yet at the moment with crushing freedoms in Hong Kong and establishing camps, they seem to be heading in another path of a historical leader.

Be the first to comment

Leave a Reply

Your email address will not be published.


*