August, the so-called Ghost Month (if you believe in that sort of thing), would be a good place to start: A World Trade Organization (WTO) panel ruled to uphold a US Section 232 restriction on steel and aluminum imports, classifying such as valid security measures and thus making China’s act of imposing retaliatory “safeguard tariffs” illegal.
And then other news trickled in. It’s not that such information are all coming out suddenly, but news media have seemingly found it impossible to hide the fact that China — one of the world’s largest consumers and supposed economic power — is in deep trouble.
Thus, The Guardian opined: “A spate of recent statistics shows that the Chinese economy is faring poorly. The country was supposed to rebound after ditching its draconian ‘zero COVID’ policies, but, after an initial revival, things have gone awry. Earlier this month it slipped into deflation. Key indicators, including industrial production, investment and retail sales, came in well below expectations.
“The most concerning figure, however, is the one that we can’t see. The youth unemployment rate was suspended from the monthly economic data release, having reached a record 21.3% in June — suggesting not only that July was grimmer, but that improvement is not expected soon. The government has stopped publishing swathes of statistics in recent years. While there are many reasons for that, and while some may still be released to data firms, it has probably helped to bury some bad news, and makes it harder to cross-reference information. Chinese economists are also under pressure to avoid discussing negative indicators.” (“The Guardian view on the Chinese economy: it looks bad. What we can’t see may be worse,” The Guardian, Aug. 21, 2023)
Youth unemployment has become so bad that publishing related data has been suspended by the Chinese government, under the “guise that it needed to review the methodology behind the closely watched benchmark, which has hit record highs in one of many warning signs for the world’s second-largest economy,” says a Reuters story carried on BusinessWorld in August. “The decision announced shortly after the release of weaker-than-expected factory and retail sales data sparked rare backlash on social media amid growing frustration about employment prospects in the country. It also marks the latest move by Chinese authorities to restrict access to key data and information, a trend that is unnerving overseas investors,” said the story.
The bet that plugging China into the world trading system will encourage it to be a more democratized, rule of law- and human rights-respecting country has been lost. Instead, Xi Jinping’s one-man rule has enclosed the country deeper into itself and, despite massive loans and investments made with other countries, remains treated with wariness and suspicion.
And this was at a time that China’s economic dominance seemed inevitable. As it stands, “economists now believe China is entering an era of much slower growth, made worse by unfavorable demographics and a widening divide with the US and its allies, which is jeopardizing foreign investment and trade,” says a piece in the Wall Street Journal. “Rather than just a period of economic weakness, this could be the dimming of a long era. ‘We’re witnessing a gearshift in what has been the most dramatic trajectory in economic history,’ said Adam Tooze, a Columbia University history professor who specializes in economic crises. What will the future look like? The International Monetary Fund puts China’s GDP growth at below 4% in the coming years, less than half of its tally for most of the past four decades. Capital Economics, a London-based research firm, figures China’s trend growth has slowed to 3% from 5% in 2019, and will fall to around 2% in 2030.” (“China’s 40-year boom is over. What comes next?,” Wall Street Journal, August 2023)
Commentators point to Japan and how the latter survived even profound dips in its economy. Such comparisons may not be helpful: “Unlike Japan, however, China would be entering such a period before reaching rich-world status, with per capita incomes far below more advanced economies. China’s national income per person reached about $12,850 last year, below the current threshold of $13,845 that the World Bank classifies as the minimum for a ‘high-income’ country. Japan’s per capita national income in 2022 was about $42,440, and the US’s was about $76,400.”
The gloomiest numbers, however, come from China’s demographics: if trends continue it will see its population halved by 48% by the end of this century. It has already seen its birthrate drop by 70% in the last five years, the most drastic in history. By 2050, it is expected that its population’s average age will be 50 years old (in contrast, the Philippines’ average age is forecast at 31.8). This is a population that will have tremendous problems in terms of productivity and consumption, not to mention a possible disintegration due to simple lack of people.
Which should, policy-wise, make the Philippines even more vigilant vis-à-vis its giant neighbor, particularly for this decade.
Jemy Gatdula is a senior fellow of the Philippine Council for Foreign Relations and a Philippine Judicial Academy law lecturer for constitutional philosophy and jurisprudence
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