“At its National People’s Congress (NPC) on Sunday, the Chinese government announced a target of “around 5%” growth in gross domestic product in 2023 — the country’s lowest for more than three decades and below the 5.5% expected by economists. The administration also proposed a modest increase in fiscal support to the economy, expanding the budget deficit target from 2.8% in 2022 to 3% for this year.” CNBC
So, what this means is – Have chickens come home to roost!
Why suddenly the World is turning against China? The chicanery and subterfuge in their approach towards World lie exposed and by whom – a homegrown Virus.
As Covid raged and ripped the world. It brought down with it the equilibrium of global supply chains and then the domino effect took over starting the chip crisis. At every step economics intertwined with geopolitics, as China’s relations with the outside world deteriorate, it will have no other option but to fall back to its domestic demand. This is where the dichotomy lies – how will the market forces respond to a forced demand push?
The new China model of “Inward looking” is alien to Xi’s stormtroopers. It has already created a fear psychosis amongst the tech titans of China by balancing the wealth divide. What the world saw was their disappearing & reappearing poster boys of dazzling growth, remember Jack Ma.
Then came Putin, after warning the west on the NATO expansion which nobody listened to he rammed Ukraine and is still holding the theme by the scruff of the neck.
This was the last coffin into the fabled multi-polar world and the perfect equilibrium between US and China.
The sanctions followed and the US was staring at its hegemonic decline, it then hit back at China with multiple actions to curtail its tech dominance ambition.
The well-laid & hidden China plan for territorial expansion was tested with the ferocity of US-led sanctions on Russia meant that China had to re-calibrate or let’s say de-calibrate its Taiwan strategy.
At this point, China cannot go for the Taiwan jugular as it will be a sledgehammer blow to its demand & supply side of the economy and will mean a global pariah status. Which will eventually end the perpetual leadership dreams of President Xi.
In a research note last week, Moody’s said that the external environment will remain challenging for China, as the U.S. and other high-income countries reposition their technology investment and trade policies in light of growing geopolitical and security considerations.
“Additional measures by Western countries to restrict investment flows to China, block access to technology, restrict market access for China’s firms, and promote diversification policies, could continue to weigh on foreign investors’ risk perception regarding doing business in China,” Moody’s said in last week’s note. “These measures also have the potential to weaken China’s economic outlook.”
Economics is slowly taking a back seat for now
With a 5 % growth target and enhancing the defense budget to 7.2% in 2023 from 7.1% in 2022 and a very modest rise in fiscal support from 2.8% in 2022 to 3% this year. Thus, the aim is to centralize the power as its economy rebalances where institutions are tightly controlled and reduce the reach of bureaucrats & technocrats. The message it will transmit to the world will be that it is keeping centralization & security over de-regulation and economic growth.
This will be the real test for President Xi as he tries to create a new power axis with Russia-China-Iran. The US is now doubling down on China via sanctions and legislation to curtail Investments, blocking technology, and pressing for increasing risk for Investors. Behind all this, a ‘Third Axis’ is taking shape with the other Big South led by India and Brazil who are no longer apron-tying to US-led dominance but carving their space.
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