China’s uncertain future

Today the world, including the Philippines, fears that China will become the main superpower in the future. This fear has been exacerbated by the recent developments caused by the Trump presidency. There are credible predictions that Trump’s isolationist policy – which includes imposing tariffs on his neighbors, China and potentially the European Union – will cause inflation and potentially a recession in the United States.

However, recent news from China reveal that this country is also undergoing serious difficulties. China’s economic miracle was started by the political and economic reforms of Deng Xiaoping. It reached its peak in 2007. Its present leader Xi Jinping has reversed many of the reforms initiated by Deng Xiaoping. Even worse, Xi seems to be dreaming of becoming another Mao Zedong.

During the past five years, there has been tremendous economic volatility in China. The real estate market and urban development have been the core drivers of China’s growth in the past two decades. These two drivers have been experiencing major corrections. In August 2024, the International Monetary Fund estimated that roughly 50 percent of Chinese property developers are on the brink of insolvency. One major cause of this persistent weakness in the real estate industry has been the decline in housing prices, which have been falling at a faster pace since 2015.

More than 70 percent of Chinese household wealth is tied up in the property market. This drastic fall in the value of property has hurt not only developers but nearly all Chinese citizens. The continuous economic decline in the Chinese economy has led to the loss of confidence in the economic stewardship of the Chinese Communist Party.

According to the Wall Street Journal, as much as $254 billion have flowed out of the country between June 2023 and June 2024. This is a clear sign that there is increasing disillusionment in the rulers of China among its citizens.

Youth unemployment has also surged to record levels. Advance university degrees and hard work no longer guarantee stable employment and upward mobility. One clear indicator of this is the fact that thousands of Chinese youth have illegally migrated to the Philippines in search of employment.

Foreign investments have also been more cautious. Vietnam and other Southeast Asian countries are now directly competing with China for foreign direct investments. Foreign direct investments in China went down by as much as 80 percent between 2021 and 2022.

In September last year, a survey by the American Chamber of Commerce in Shanghai revealed that only half of foreign firms expressed optimism about China’s five-year business prospects. This was the lowest level of confidence in the survey’s 25-year history.

I have personally received information about certain American firms that are closing down their offices in China and relocating its personnel to either Canada or the United States.

In addition to these internal problems, several major economies like the United States, Australia and Canada have issued tariffs and other mechanisms to protect their domestic economies. Donald Trump has recently announced a 10 percent additional tariff on top of previous tariffs on all Chinese imports to America. It will be remembered that in March 2019, the European Union labelled China as a systemic rival. The EU later moved to impose stricter regulations on Chinese investments in Europe’s critical infrastructure, technology and digital sectors. It further imposed tariffs of about 45 percent on Chinese-made electric vehicles.

China’s dynamic growth in the past two to three decades has been dependent on exports. Its balance of trade has been the major contributor to its internal economic growth. For the past 30 years or so, China has been enriching itself at the expense of other countries. This reaction to deliberately slow down China’s trade growth was bound to happen. After all, other countries must protect their own industries which provide employment for its local population.

Entrepreneurs were once the key engines of China’s economic miracle. In recent years, Xi Jinping has consolidated power and has increasingly asserted control over the private business sector. China’s business sector now operates in a climate of fear and uncertainty.

Today, the Philippines finds itself in an uncertain political and economic world. The two superpowers, China and the United States, are heading towards economic problems. However, this competition between Washington DC and Beijing will remain the defining feature of the coming decade.

Throughout this turbulent geopolitical world, our country must base its foreign policy first and foremost on its national interest alone.

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As of this writing, the surprising news is the arrest of former president Rodrigo Duterte. While all the attention was on Villamor Air Base where he was being detained, other pertinent news have been ignored.

Several groups that included families of EJK victims are planning to hold thanksgiving masses. Let us also remember all those who were deprived of their basic human rights and were killed in cold blood, like the student Kian delos Santos, who was pleading with his killers to spare him, saying he still had an exam the following day. We pray that the families of the thousands of victims will finally find justice and peace in The Hague.

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Email: elfrencruz@gmail.com