cross-posted from: https://feddit.org/post/3630108

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The [Chinese economic] model that has powered four decades of breakneck economic growth was reliant on cheap exports and wasteful state-led investment in property and infrastructure. It is no longer sustainable. It has led to soaring debt and diminishing returns, with China littered with ghost cities, containing 60 to 100 million empty or incomplete homes, while companies accounting for 40% of China’s home sales have defaulted. It is widely agreed that China needs to rebalance its economy, that consumers need to spend more, since private consumption accounts for just 39% of the economy – extremely low by world standards (the figure in the US is 68%). But there is no consumer confidence, with 80% of family wealth tied up in property and no meaningful social safety net.

China’s leader Xi Jinping hopes renewable energy tech can replace property as a new motor of growth, and mouth-watering subsidies have been thrown at industries ranging from solar panels to electric vehicles (EVs) and batteries, leading to massive over-capacity and vicious price wars. Yet the benign global environment that accompanied China’s earlier export splurges has gone; the world is much more wary, and both the US and EU have imposed hefty tariffs on Chinese EVs and solar panels they allege are being dumped at below cost.

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China has never provided a level playing field for foreign business, but under Xi, the environment has become increasingly hostile. Last year, direct foreign investment into China fell to a 23-year-low. In Western boardrooms, once so bewitched with capturing a share of the mythical China market that they would put normally rational decision-making aside and suffer almost any indignity, ‘resilience’ has become the watchword. The Ukraine war has exposed the danger of over dependence on autocrats with hostile ambitions.

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