China’s Post-COVID Economy Circles the Drain – The American Spectator

When China lifted its authoritarian COVID restrictions last December, its economy was expected to roar back. But its second-quarter numbers just came in, and they suggest that the economy is sputtering and slipping into deflation.

In fact, some economists have begun comparing the floundering Chinese economy to that of the Japanese of past years — the “poster child” for stagnant economies.

China’s political clout has always depended on its rapidly growing economy — something American legislators and economists on both sides of the aisle have been warning the public about for years. Just two years ago, President Joe Biden warned that the Chinese were “eating our lunch,” and in 2020 then-President Donald Trump accused China of “ripp[ing] off” the United States.

Now, while China’s economy is faltering, Western nations and their manufacturers seem to be interested in distancing themselves — a trend that does not bode well for the communist country.

Chinese Economic Markers Aren’t Looking Good

The Chinese economy is facing hurdles on multiple fronts. Not only is the country trying to come back from one of the most stringent and long-lasting COVID lockdowns in the world, but it’s also on the brink of deflation, consumer spending isn’t budging, and youth unemployment is at a record high.

It comes as no surprise, then, that China’s economy grew by just 0.8 percent between April 1 and June 30 — a minuscule number compared with the U.S. economy’s growth of 2.4 percent during that same period.

When the West opened back up after COVID, consumer spending skyrocketed — as did inflation. The Federal Reserve and the European Central Bank have desperately tried to manage raising interest rates.

The Chinese government, on the other hand, saw very little increase in consumer spending, and now the economy appears about to hit a period of deflation. “Prices charged by Chinese factories that make products ranging from steel to cement to chemicals have been falling for months. Consumer prices, meanwhile, have gone flat,” the Wall Street Journal reports.

In June, China reported that it experienced zero inflation. That may sound great, but it’s indicative of flatlining consumer spending and a falling employment rate among young Chinese workers — one-fifth of whom don’t have a job. (READ MORE: The Coldest War: Geopolitical Struggle in the Arctic)

It’s not that jobs aren’t available; factories are actually experiencing major labor shortages across Asia, including in China. Younger Asians are simply not as willing to stand in factory lines. They would instead prefer to become Instagrammers and social media influencers or work in aesthetic coffee shops.

Western Companies Move From Chinese Supply Chains

Meanwhile, China’s economic growth is faltering. It is struggling to attract and retain Western manufacturers and investors who are being hampered by legal restrictions from both China and the West.

Chinese exports to the rest of the world have dropped precipitously — by 20 percent just last month — since last October, according to the Wall Street Journal. Those numbers seem to be the result of worsening tensions between Beijing and the United States; manufacturers have been taking drastic steps to reduce their reliance on Chinese supply chains.

In June, a bipartisan group of legislators met with the CEOS of Ford Motor and General Motors to urge those car manufacturers to reduce their reliance on Chinese-supplied auto parts — particularly parts used to assemble electric car batteries. (READ MORE: DOJ Indicts Two Navy Sailors for Chinese Espionage)

Western investors, especially Americans, are also moving away from Chinese investments. In July, American investment in China had dropped to $400 million from 2021’s $35 billion. Last Wednesday, Biden issued an executive order prohibiting Americans “from investing in some Chinese companies developing advanced semiconductors and quantum computers starting next year,” the Wall Street Journal reports.

In Europe, business owners and investors seem to have lost confidence in the Chinese economy and have become increasingly nervous about the CCP’s stringent security controls and its failure to take action on promised reform. One in 10 companies told the European Chamber of Commerce that they had shifted investments out of China, according to the Associated Press.

Western Nations Distance Themselves From China

The Western shift from China hasn’t just happened on the economic front; both the United States and its European allies seem to be increasingly interested in breaking away from China’s geopolitical influence.

For the most part, Biden has left the Trump administration’s tariffs in place — apparently in an attempt to hold the same tough line against China that Trump did, arguably with varying success. Just last fall, the Biden administration pushed the $430 billion Inflation Reduction Act, which claimed to “wean” the U.S.’s electric vehicle industry from Chinese supply chains.

Meanwhile, European countries are distancing themselves from Chinese President Xi Jinping’s attempt at economic diplomacy. Early reports suggest that this year Europe will do its best to avoid the Belt and Road Forum, an annual meeting of global leaders invested in a Chinese-run initiative to open and expand trade infrastructure between the West and China.

When asked in March about European involvement in the initiative, European Commission President Ursula von der Leyen warned the Belt and Road Initiative indicates that “the Chinese Communist Party’s clear goal is a systemic change of the international order with China at its center.”

It remains to be seen whether China’s latest economic struggles are merely a hiccup on its path to global economic dominance or are indicative of a longer trend toward decline. Similarly, one wonders if the West will continue to distance itself from China. Do these actions indicate that Europe and America are finally taking the Chinese threat seriously?