Posted on Aug 21, 2023
China's economy has deflated. What does it mean in terms of China's expansionism initiatives?
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China began expanding its reach through its OBOR and MSR initiatives. It wanted to drive China across Asia, Europe, Africa and into the Americas. It wanted to control global economies through its preferred loans from its BRICS program. However, the Chinese economy has gone into deflation and consumer confidence at home has taken a dive. European countries are increasingly lowing their reliance on China. How will these changes affect the Chinese initiatives OBOR and MSR?
China
Economy
Posted >1 y ago
Responses: 6
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It might mean decline of Chinese economic influence and difficulty of getting ROI. Japan declined from being the #2 economic power and its influence is minor compared to its heyday. Some nations that previously made deals with China may attempt to renegotiate previous exploitive terms since China needs them more now.
https://www.ft.com/content/52c805d5-c759-46cc-a0fe-2de2f2d71850
https://www.ft.com/content/52c805d5-c759-46cc-a0fe-2de2f2d71850
China’s Japanification | Financial Times
The good, bad and ugly, according to JPMorgan
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CPT Gurinder (Gene) Rana
Thanks LTC Eugene Chu. China exploited Sri Lanka earlier and took over the port city of Hambantota. Since then, Sri Lanka has turned to India for assistance. Indian Oil runs 250 gas stations in Sri Lanka and plans to add another 30 odd outlets, which has pinched China and China is rushing to try and bring Sri Lanka back under its control. Indirectly, Sri Lanka is renegotiating the exploiting terms in the Chinese contract under which terms Sri Lanka lost the Port of Hambantota to China.
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It could be that China's economy is heading for a total collapse. You are probably thinking: no way! It boasts a massive military, has an iron grip on its people, and owns a whopping $870 billion in U.S. debt. However, a few metrics offer evidence of an economic contraction. For example, the country’s exports dropped 9.9% from the previous year. This is not good - when you look at China's economy, you will see that it relies heavily on international trade; for example, in 2021 its exports accounted for around 20% of its gross domestic product. Because of that, China is actively seeking to shift towards domestic consumption to drive growth. However, a larger domestic shift will take time and require significant changes in China's economic structure and policies. In the meantime, China's economic decline will continue - perhaps not total but enough that other countries will notice.
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CPT Gurinder (Gene) Rana
In terms of China's initiatives, to include OBOR and MSR, how does China's deflation affect its expansionism policies? Trade partners of China who have Chinese loans will look to renegotiate the exploitative terms in their contracts. What do you think?
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1SG Dean Mcbride (MPER) (CPHR)
From what I recall, China's OBOR is an attempt boost its domestic growth and is part of the country's strategy for economic diplomacy. It's mainly designed to connect less-developed border regions with neighboring nations. Hopefully, with a resulting bump up in economic activity. I don't know enough about the subject to tie it in with Chinese Partner's loan negotiations. Basically, Chinese banks are always willing to restructure the terms of existing loans. Other than that, I would need to do a lot of research before I could add to my response.
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China’s economic woes will become worldwide. We may not depend on them manufacturing so many products but our own factory orders are declining. I would think that inflation has put the brakes on manufacturing. The destruction of the Nord Stream pipeline has crippled German industry and they are in recession. The downward cycle in my humble opinion is just starting. New vehicle inventories according to Cox Automotive reached its highest level in two years. Layoffs will be the result of slowing
Manufacturing. China is the industrial motor for the world, and any slowdown in trade speaks volumes about here, Europe and the rest of the world. When was the last that time the IMF, International Monetary Fund forgave any loans ? Yes, China May slow on its Belt and Road initiative but the sad part is most of the world is slowing down economically.
Manufacturing. China is the industrial motor for the world, and any slowdown in trade speaks volumes about here, Europe and the rest of the world. When was the last that time the IMF, International Monetary Fund forgave any loans ? Yes, China May slow on its Belt and Road initiative but the sad part is most of the world is slowing down economically.
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CPT Gurinder (Gene) Rana
SGT Stephen Rowland, China is experiencing a deflationary economy which means that consumer confidence at home is tanking. The UK and other EU member countries are reducing their reliance on Chinese goods and services. Hence, the OBOR and the MSR initiatives will be affected. Chinese foreign income will be reduced, as has already been realized this year and will further drop next year. As such, China's economy and expansion aspirations are affected because lending power has dropped.
Looking at Sri Lanka, for example, Indian Oil Corporation has 250 fuel stations operating across Sri Lanka. China loaned Sri Lanka to develop Hambantota Port. The high interest on the Chinese presidential loans couldn't be repaid by Sri Lanka, so China took ownership of Hambantota in Sri Lanka. Today, Indian Oil Corporation has received Sri Lanka's approval to open another 30 fuel stations and China is racing to try and overturn this Government to Government agreement. Indirectly, Sri Lanka has snubbed China. This is how I see it.
The U.S. is also reducing its reliance on China for manufacturing and other services. The U.S. is looking at India as its next hub, perhaps. German vehicle manufacturers have set up assembly hubs in India too. Japan already manufactures cars, SUVs and is involved in joint ventures in India. India is also seen as the alternate Silicon Valley and ISRO the next generation Space Exploration Agency. However, India has a few more wrinkles to iron out for smooth foreign investments. This is not to say that India is it, but India is definitely a favored choice.
Looking at Sri Lanka, for example, Indian Oil Corporation has 250 fuel stations operating across Sri Lanka. China loaned Sri Lanka to develop Hambantota Port. The high interest on the Chinese presidential loans couldn't be repaid by Sri Lanka, so China took ownership of Hambantota in Sri Lanka. Today, Indian Oil Corporation has received Sri Lanka's approval to open another 30 fuel stations and China is racing to try and overturn this Government to Government agreement. Indirectly, Sri Lanka has snubbed China. This is how I see it.
The U.S. is also reducing its reliance on China for manufacturing and other services. The U.S. is looking at India as its next hub, perhaps. German vehicle manufacturers have set up assembly hubs in India too. Japan already manufactures cars, SUVs and is involved in joint ventures in India. India is also seen as the alternate Silicon Valley and ISRO the next generation Space Exploration Agency. However, India has a few more wrinkles to iron out for smooth foreign investments. This is not to say that India is it, but India is definitely a favored choice.
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