By Tom Fowdy
Global media discourse on China's economy has been generally negative for a long time. Although such claims are obviously biased, they are not without context. I believe, globally speaking, the age of true prosperity has been over for a long time, even as China has grown in years past. Since 2008, the world has lurched from one global economic crisis to the next, whether it be the global financial crisis, austerity, the COVID pandemic, the war in Ukraine, the list goes on.
The economic shockwaves of these crises have influenced seismic political changes which are upheaving the status quo, in particular the geopolitically driven effort of the United States to effectively dismantle the multilateral trading order as we know it. Trump, who is far from done, has created unprecedented headwinds through his assault on the global free market system, creating discomfort and uncertainty that his actions place on markets and investors. His actions only add to his previous legacy, as well as that of Joe Biden's.
In this case, it is assumed that amidst such upheaval, and especially when it is the primary target, China might not have much to crow about. However, contrary to the expectations of many, Beijing is a surprise bright spot. As reported by the BBC: "the world's second largest economy grew by 5.2% in the three months to the end of June, compared to the same time last year," with China's National Bureau of Statistics noting that the country "withstood pressure and made steady improvement despite challenges." Sources of the growth involved manufacturing and exports, such as electric vehicles and industrial robots, as well as a 4.6% growth in retail sales.
The positive news led to share gains in Hong Kong, with the Hang Seng index increasing by 1.6% on Tuesday. A series of gains has seen the stock index head towards 25,000 points by Friday, placing it on 39.50% year on year and thus accumulating its recovery towards the pre-riots, pre-pandemic era, the initial slump caused by Trump's trade war tariffs having been completely reversed.
This might lead us to remember that even amidst the negativity, China is far more resilient than given credit, showing the resources and capabilities of its leadership to mitigate crisis in a geopolitically uncertain and unpredictable world. Western media coverage of China frequently misunderstands or misrepresents this, and through a mix of political bias, concerted negativity, or misunderstanding, enjoys intentionally depicting pessimistic prospects for the Chinese economy, repeatedly using terms such as "faltering," "stagnating," and so on to sour business optimism and investor confidence. Major news outlets such as have enjoyed proclaiming the "end" of China's rise.
It is therefore natural amidst these embedded assumptions that Trump's new trade war would be catastrophic for China, perhaps especially so from a US point of view. This is because Trump's narrative misleadingly depicts China as an export-oriented economy that profits purely at the zero-sum expense of the United States, cheats, and thus has no true merits of its own. Too easily does such thinking lazily depict China as another Soviet Union, assuming that its system is rooted in an inherently flawed and dysfunctional ideology; therefore, it is destined for an inevitable stagnation and decline.
This thinking is incorrect for several reasons. First, China has been focused on diversifying and expanding its export markets for a long time amidst the political hostility of the US, and in this respect, Trump's trade war tariffs are hardly a new thing.
Second, China's export strategy has involved moving away from "low-end" manufacturing exports, like in times of old, but advancing up the technological "value chain" and exporting more sophisticated, higher value items. Critics like to point to supply chain diversification as evidence of economic attrition in China, but ask yourself, is China set on making cheap plastic combs for hotel sanitary kits, or semiconductors, solar panels, electric vehicles, and robots? The former might see somewhere like Vietnam as a cheaper base, but otherwise, Chinese companies are climbing up the scale, hence China became the largest exporter of Electric Vehicles in the world and the largest manufacturer of semiconductors.
Third, China's leadership has sought to prepare the domestic economy to more readily withstand external shocks, as part of what was described as "dual circulation" several years back. With a population of 1.4 billion, China out scales several continents, and thus has the domestic market capacity to thrive on its own terms. The government has sought to transition the country into a consumer economy and has utilised strategies to boost consumption through tourism by expanding the visa-free program. In any worst-case economic scenarios, the government is also able to invest in the economy and keep it flowing through stimulus.
In summary, China has shown remarkable endurance amidst a global storm of the White House's making. The foundations of the Chinese economy are more robust than given credit for, which is largely the product of years' worth of highly conservative approaches that have emphasized long-term stability rather than rapid, unsustainable growth, and is far from the monolithic and incompetent caricature that is depicted. The country's government navigated a property crisis and prevented a "bust," all while facing the global pandemic, trade wars, the spillover of wars and sabotage of the global economy in the name of geopolitics.
It might be concluded that Beijing sees the development of China as a marathon, and not a sprint, adjusting problems along the way rather than burning out. Hence, markets in Hong Kong are responding with confidence in the direction things are heading.
The views do not necessarily reflect those of DotDotNews.
Read more articles by Tom Fowdy:
Opinion | HK's market boom defies the naysayers and shows the city's value remains
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