April 23, 2024
World Economy

Xi Jinping will make the West pay for China’s economic collapse

In part, it’s just simple mathematics. The larger an economy gets, the more difficult it becomes to sustain past levels of growth.

The comedown is nonetheless proving politically punishing for a regime which has for decades thrived on the apparent development miracle it has engineered. The promise of ever-growing prosperity is the glue that keeps Xi Jinping in power. Worryingly – and it happens to all totalitarian leaders – he must now find other, less benign, pursuits to unite the nation.

China’s economic travails already find their expression in rising geopolitical tensions, tit-for-tat protectionism and the advent of a new cold war.

The other likely consequence is that China will soon be directly exporting its economic ills to us here in the West.

There’s a parallel here with Covid, which relied on international connectivity to transmogrify from an apparent outbreak of influenza in Wuhan into a hugely destructive, global pandemic.

Similarly, China’s economic implosion threatens a worldwide contagion of deflationary forces, spread from one country to the next via the transmission mechanism of global trade and finance.

For decades, China has remained largely immune to the ups and downs of the business cycle, with a rate of growth that has left Western economies standing.

In the 40 years up until the pandemic, China’s rate of growth was around three times faster than that of the US, enabling a breathtaking process of economic catchup.

When America and Europe caught pneumonia during the banking crisis of 2008-10, China sailed on regardless, apparently oblivious to the Western collapse.

“You were my teacher,” Wang Qishan told his then opposite number in the US, Treasury Secretary Hank Paulson. “But look at your system, Hank. We’re not sure we should be learning from you anymore.”

China’s advance was tolerated because it was thought that allowing China access to Western markets on equal terms would be as beneficial to us as it was to them, and in time would open the doors to China’s eventual democratisation.

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