How could one of the largest economies in the entire world suddenly need the support
of its biggest competition? What led to China experiencing staggering growth and seeking to
engage with the US? And could ironing out their rocky relationship even be of benefit to either
country and their economies? Well, we’re about to find out. Welcome to the Infographics Show,
and join us as we do our best to determine the real reason that China
might desperately need the United States again. From late 2019 all through 2020 and with many of
its effects still being felt today, the entire world was rocked by the Covid 19 pandemic. Many
schools and businesses needed to implement social distancing measures in order to reduce the spread
of the respiratory virus, and in some countries, nationwide lockdowns became a regular occurrence.
The pandemic had a considerable economic impact on every major country across the globe. The fallout
of so many businesses closing their doors in order to prevent the spread of COVID-19,
as well as restrictions on importing and exporting goods, meant that, for many countries,
less money was going into their economies while plenty was going out. This led to significant
financial fallout the world over, which some economies are only just starting to recover
from. But over in China, that recovery seems to have been unexpectedly hindered.
For a time, China’s economy looked to be doing relatively well, getting better post-Covid at
a rate that was actually exceeding the Chinese government’s expectations. Although the country's
consumers were avoiding larger purchases like new cars or apartments, and a number of China’s
factories were running at a lower capacity than usual, their exports were recovering and in
some cases actually getting stronger. Since exports are one of the major,
if not most important, pillars holding up China’s economy, free flowing global trade is crucial
for the economic well being of the nation. Some of their biggest international buyers
are the United States, Hong Kong, Japan, and Germany. Over the past decade, China’s exports
have steadily grown, with the exception of 2009. During that year, the global financial crisis and
an economic downturn across the world caused trade to slow down in most countries. Additionally,
2016 was another year that saw a notable decrease in global demand for products
exported from China. As well as being the most heavily populated country on the planet, China
is also both the largest manufacturing economy and the largest exporterin the world. This means
anything that hurts global trade inevitably has some kind of negative impact on China.
Earlier in 2023, a few months before we made this video, China was getting back on its feet,
at least economically speaking. The construction of new housing was on the rise, and although that
had slowed down slightly, there were still plenty of investments being made into the infrastructure
and manufacturing sectors. This wave of economic activity started in December of 2022 when the
Chinese government lifted their ‘Zero Covid’ measures, which had enforced a number of industry
shutdowns and mass testing for the coronavirus. While intended to monitor and potentially slow
the spread of Covid 19, these precautions had the side effect of also slowing down something else:
the growth of China’s economy. During the fourth quarter of 2022,
the country saw a worrying uptick in cases of COVID-19, which caused growth to drop to just
short of three percent. After the zero Covid measures were lifted, this growth went up by
four and a half percent between January and March of 2023 when compared to the figures from the same
months during the previous year. This growth was largely driven by consumers gaining purchasing
confidence, spending money, and, thus, fuelling the economy. So, why is all of this important?
China plays an crucial role on the global economic stage. It’s the second-largest economy in the
entire world, with only the United States ranked above it. China’s Gross Domestic Product – the
value of all the goods produced and all services provided during a single year – was almost 18
trillion dollars. Considering this is around 17% to 20% of the global GDP, if China experiences
an economic downturn, that shock will almost certainly impact every other nation in the world.
China is also part of the economic group BRICS, which also includes Brazil, Russia, India,
and South Africa. BRICS is a complicated topic in and of itself, but for the purposes of this video,
you just need to know that, in 2022, China outranked all the other BRICS member countries
in terms of GDP. However, despite this, 2022 was still considered to be one of the
country’s worst economic performances in years. Given the size of its economy and the rate at
which it has grown, China has been one of – if not the single – driving forces behind economic growth
for the entire world. That’s what makes it so important, and why a sudden, unexpected slowdown
in their recovery from Covid’s economic aftermath should be a cause for concern for other countries,
especially those that trade with China. That being said, we’re living in a time
where there are constant tensions between various nations across the world, and as
those continue simmering, they can occasionally boil over and cause disagreements to occur.
Despite perhaps not always seeing eye to eye on everything, nations like the United States and
many throughout Europe maintain an interdependent relationship between their economies and China’s.
Although there was a warning that a painful economic slowdown was on the horizon,
the country’s GDP during 2022 indicated that the second-largest economy in the world was
coming back with a vengeance and shaking off the struggles of the pandemic. China
had already taken a number of steps intended to stimulate some rapid growth in its economy. One
of the most important investments China has made so far has been in its infrastructure,
laying the groundworks for high-speed rail lines to connect the colossal nation as
well as building new highways and bridges. You might think at first that investing all
that money in infrastructure wouldn’t lead to massive economic growth. That’s partly true,
but providing easy access to travel routes can allow workers to arrive at their jobs faster, thus
making them more efficient. The more efficient, the more profit a company makes (in theory) and
the more that money can contribute to the overall economy. It also serves to make the country’s
logistics smoother in general, allowing the transport of goods to move at a faster pace. And
that’s not even mentioning the jobs that can be created by investing in infrastructure; after all,
a highway or high-speed train won’t build itself, you need engineers, planners, and construction
workers in order to achieve those goals. All of these factors contribute to growing the economy.
Additionally, China’s primary bank, the People’s Bank of China,
announced to commercial banks that they were permitted to hold slightly smaller reserves
against possible losses, which freed these banks up to lend more to people seeking loans.
The effects of these economic policies were also felt on a smaller scale. When it came to traveling
or frequenting restaurants, public spending was on the rise. Some hotels were forced to shut down
their elevators to save money amidst losses they’d made during the pandemic. Now, these
same establishments, which only saw occasional diners in their restaurants, were now receiving
hundreds of customers, with lines of people waiting for a table trailing out of the door.
However, these hints that the economy was stabilizing were perhaps misleading. There
was an increase in consumer spending, but it was uneven. One butcher at a street market
in Suzhou noticed that his customers were still being frugal, staying highly selective
about where and how they spent their money. Frugality is, of course, a person’s right
and down to their own discretion, but this particular vendor, a small business owner,
noticed the impact it was having on his sales. However, a catfish vendor within the same Suzhou
market had a different experience. As he often sold his wares to local restaurants,
his business significantly slowed down during the pandemic when local restaurants shut down . Then,
once restrictions were lifted, the same clients he had sold to previously were placing large orders
once again. Those two different examples taken from businesses within the same marketplace are
basically a microcosm for what’s been going on with China’s economy when it comes to how
consumers are spending their money. Money is still changing hands and flowing through the economy,
but it’s not happening everywhere. China’s economy is getting stronger, but unevenly.
Some sectors contributing to the Chinese economy haven’t even started to fully recover yet. Another
industry that was hit by having to shut its doors during the pandemic was movie
theatres. Despite the increasing, yet uneven, level of consumer spending in areas like food,
a whole third of China’s movie theatres are yet to reopen. Country-wide box office revenue was down
by a staggering 55% in March of 2023. Needless to say, things still aren’t running smoothly.
It isn’t all bad, though. Much of the rest of the world is finding that the economic fallout
of COVID is coming in the form of inflation, in large part thanks to governments injecting
money into their economies during the pandemic in a near-sighted attempt to stop them crashing.
But over in China, there’s actually very little sign of inflation. One of the more
commonplace strategies during the pandemic in Western countries was to send relief checks
or coupons to households of essential workers in order to bolster their income while they still had
to work during the rise in Covid cases. In China, this wasn’t the case, meaning there was a limit
to how much companies could raise the prices for their goods as there was less money to go around.
Of course, part of the reason for the continued frugality and uneven spending among the population
is largely down to how the pandemic affected people’s incomes. Millions of working people
in China had their income severely depressed, and the amount they currently make still hasn’t
caught up to pre-pandemic levels. In February of 2023, unemployment of people between the ages of
16 and 24 was just over 18% – within a month, it had already climbed more than another 1.5%.
Fortunately, this isn’t the case for other demographics, with unemployment between
those aged 25 to 59 dropping down to 4.3% in March 2023, down from 4.8% in February.
In addition, factories are also attempting to work their way through the backlog created by
having to shut their doors during the pandemic. The output of factories, mines, and power plants
all contribute to China’s overall industrial sector, and production was able to significantly
rise in early 2023 as these businesses attempted to meet the demand for their goods.
However, the demand for these goods didn’t just disappear during the height of Covid,
a lot of the country's industrial production centers around the products it exports
internationally. The industrial sector is in a delicate balance of attempting a to quickly
recover from the effects of the pandemic while also having to try and catch up on a backlog
of orders for parts and goods that built up while the Zero Covid lockdowns were in place.
One of the largest sectors experiencing a sharp slowdown because of this is China’s automotive
industry. Car sales dropped over 13% in the first quarter of 2023, also being hindered by the
government reinstating an added sales tax on the sales of gas-powered cars, likely implemented to
encourage people to turn to electric alternatives. Now, all of these factors have led the pace of
China’s economy to slow right back down. In spring of 2023, the annual pace of economic
growth dropped to a little over 3%, which, as you can imagine, the Chinese government wasn’t
all too pleased about. It falls short of their target for restabilizing their economy. This
all begs the question – just what does the United States have to do with all of this?
Well, the current falter in their economy has encouraged senior Chinese officials to engage
in talks with other nations – even those often considered to be their geopolitical
rivals. The United States and China are the two largest economies in the world,
and together account for around 40% of all global economic output. Naturally,
they’ve been rivals for quite some time, and yet, they are also largely dependent on each
other for trade that brings money into both of their economies. Despite not always being on the
best terms, with both attempting to sever their dependence on one another, the two have continued
to engage with each other on an international economic level. Now, though, China has seemingly
changed its tone towards the United States. The climate envoy for President Joe Biden,
John Kerry, and Treasury Secretary, Janet L Yellen, were both invited to Beijing
on separate occasions for diplomatic meetings with high-ranking Chinese officials. Similarly,
ministers from China are expected to travel to Washington DC in order to conduct further
talks on issues like climate change and trade. Seeking to announce to the world that China is
open for business and in order to stoke up its economy, the country’s premier and
second-highest official met with some of the country’s biggest tech companies to
encourage them to hire more workers, with an emphasis on stirring up more economic growth.
There has been an ongoing push by the Chinese government to try and assert greater political
control over its tech industry, prompting many Chinese professionals in the field to emigrate.
Whereas China’s foreign policy has historically held more animosity, this softening in their
approach, especially towards the United States, brings with it security concerns. While the more
lax policy and friendlier diplomatic relations between the two could lead to the positive
change China is seeking for its economy, their previous relationship could be what makes the US
reluctant to accept the proverbial olive branch. Recently, China enacted policies that would
undermine its role within the global supply chain, affecting other companies that rely
on them for trade. They declared intentions to limit the export of certain rare materials
used in the production of semiconductors. This was widely believed to have been done
in retaliation against the United States after they limited the sale of their exports
of said advanced semiconductors to China. As much as it is possible that China’s recent
economic struggles might soften their approach to foreign relations and mutual agreements could put
them back on track toward stable economic growth, there’s no guarantee. US-based companies have
often complained about how much harder it’s become to conduct business in China. Their
government has placed a strong focus on their national security, leading to Chinese authorities
conducting raids on American companies, even sometimes going as far as detaining personnel.
The geopolitical landscape of the world plays a huge role in the decision-making of companies and
their investors. Given the state of its economy and the uncertainty over how well it’ll work with
America, many companies have to choose whether they funnel money into China’s economy and if
they can continue to rely on it for exports. It’s difficult to say whether China’s appeal
to the United States will pay off. It’s no secret that the United States has often felt
threatened by China’s growth and whether or not this would impede their supporting
efforts to help restabilize China’s economy. The United States isn’t known to budge,
meaning they’re unlikely to change their policies that have been targeting China’s
technology advances in order to slow them down. This unwillingness to relent gives China very
little incentive to make compromises, regardless of their own ongoing economic issues. Not to
mention, the United States – like many other parts of the world – is also still trying to
recover from the financial impact of the pandemic too, given how far-reaching its consequences were.
There is a lot at stake for China, economically speaking. There are millions of jobs within the
country that rely heavily on continued global trade and selling goods to other countries.
As the world’s largest trading nation, it falls to China to ensure they are allowing
the systems of global trade to continue to work. However, even if they are to try and play nice
with the United States, there is always the concern that the US won’t want to reciprocate.
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