A PEEK INTO EVERYDAY CHINA : PART 2 by Lt Gen P R Shankar (R)

PART 1

@ https://www.gunnersshot.com/2021/11/a-peek-inside-everyday-china-by-lt-gen.html

This is also not an original article. It is a collection of headlines and excerpts from the South China Morning Post (SCMP) just like in Part 1. It is from a Chinese platform and written by Chinese journalists. Not me. It gives you a story from the horses mouth.  When you read all the articles some significant issue comes out. Weaknesses in China start appearing.

 

As I keep repeating,  in China two things matter the most – People and Politics. This set of excerpts is another attempt to get to you to the People as they are reported by a Chinese news portal. The links for various articles are provided so that those interested can go into details.

 

Yesterday, I wrote an article The Sino-Indian Logjam: The Coming Conflict @ https://www.gunnersshot.com/2021/11/sino-indian-logjam-coming-conflict.html. The picture I painted of China in that article, is one of a militant nation led by an ambitious leader. Compare it with the picture emerging from this article. Take into account that the Omicron strain of the Virus is going to spook China even more and keep it further isolated. Then you can make an intelligent assessment whether China will have the capacity to get into high risk conflicts at all. If it does get into a conflict with India or Taiwan, it does so on a slowing economy. That means,  economic considerations are not prime drivers in Chinese calculations to instigate conflict. Hence Xi and his motivation comes into picture even more sharply. Economic down turns could be the reason for war. Then one has to go back in history. When 1962 happened, China was in the grip of a devastating famine in which there were even reports of cannibalism!          

Head Line : Record 2.1m Chinese sit civil service exam as economy slows, youth jobless rate climbs @ https://www.scmp.com/economy/china-economy/article/3157664/record-21m-chinese-sit-civil-service-exam-economy-slows-youth?module=lead_hero_story&pgtype=homepage

Extract :  More than 2.12 million registered for Sunday’s ‘guokao’ exam, the first time the number has crossed 2 million… That is 35 per cent higher than last year’s 1.57 million. This year’s surge in numbers comes amid a slowdown in economic growth, caused in large part by the Covid-19 pandemic, and a persistently high youth jobless rate. Applicants have just a one-in-68 chance of success of landing coveted ‘iron rice bowl’ positions

 

My Comment: We all thought that China was a land of milk and honey where jobs were guaranteed! Don’t you think they have a problem? 

           

Headline: China risks ‘colossal Covid-19 outbreak’ by opening up, study finds @ https://www.scmp.com/coronavirus/greater-china/article/3157613/china-risks-colossal-covid-19-outbreak-opening-study

Extract: China could face more than 630,000 coronavirus infections a day if it dropped its zero-tolerance approach and followed other countries by lifting travel bans, according to forecasting by Peking University mathematicians….the four mathematicians argued that China was not ready and could not afford to lift entry-exit quarantine measures without more efficient vaccinations or specific treatment….a colossal outbreak which would almost certainly put an unbearable burden on the medical system. China’s Covid-19 containment strategy relies on repeated mass mandatory swab testing to identify positive cases each time an infection is found in a new area. Its borders have been closed to most countries since March last year and it has one of the world’s longest quarantine periods. But the measures take a heavy economic toll and critics question their value, given that China has reported only sporadic outbreaks.

 

My Comment: This article is revealing. Firstly China is the creek without a paddle. The world is learning to live with the Virus. They are insisting on living without it. Their vaccines are clearly weak and this is as much admitted in the report. This report seems to be only to endorse and justify Governments zero covid policies. Now that Omicron is in the air, China will tighten up and isolate even more. The diplomatic and economic toll will only increase with time. My opinion always has been that till such time the virus is around, China’s rejuvenation dream will have to wait. China’s real enemies are internal to it- Xi Jinping’s virus and Deng Xiaoping’s one child policy. In the meantime, the Delta is busy popping up all over China and leading all of them on a wild virus chase. A recent one is @     https://www.scmp.com/news/china/politics/article/3157437/covid-19-rears-again-china-6-cases-3-cities-single-day?module=lead_hero_story&pgtype=homepage 

    

Headline : US-China tech war: Beijing’s semiconductor ambition faces fresh headwinds as Washington adds pressure on SK Hynix @ https://www.scmp.com/tech/tech-war/article/3157105/us-china-tech-war-beijings-semiconductor-ambition-faces-fresh?module=lead_hero_story&pgtype=homepage

Extract: SK Hynix, a South Korean semiconductor giant, had planned to install some of its new extreme ultraviolet lithography (EUV) machines produced by Dutch firm ASML in its factory in Wuxi, Jiangsu province. However, this was thwarted after Washington barred it from shipping the equipment to China…The US has placed trade restrictions on several Chinese companies in recent years, including telecoms giant Huawei Technologies Co, citing national security concerns amid rising tech tensions between the world’s two-largest economies. Beijing, meanwhile, has been pushing for greater self-sufficiency in strategic technologies, such as semiconductors. ASML produces lithography systems used by leading global foundries and chip makers including TSMC and Samsung.

 

My Comment : USA has blocked Chinese access  to produce semiconductor chips for cutting edge technologies. China’s own efforts to circumvent the sanctions have not only been unsuccessful but its effort to make its own chips have come to nought. China sorely lacks technology to produce seeds to enhance its food security. Overall, China presents two shades – where it is good it is very very good. Where it is bad it is horrible!  Besides this USA has also started blacklisting Chinese companies which are tied up with Hi Tech defence sector @ https://www.scmp.com/news/china/article/3157288/12-more-chinese-companies-are-placed-us-export-blacklist?module=lead_hero_story&pgtype=homepage  

                  

Headline : Why China’s worsening demographic situation will impact economic prospects for decades to come @ https://www.scmp.com/news/china/article/3156961/why-chinas-worsening-demographic-situation-will-impact-economic?module=opinion&pgtype=homepage

Extract : China’s demographic situation is worsening at an alarming rate, spelling trouble for the country’s economic prospects for decades to come…the country’s demographic changes are happening at a speed and scale unseen in any other country. It is partly a result of the ruthless implementation of the one-child policy that ran from the late 1970s to the early 2010s, a massive state-engineered project that Chinese authorities try very hard not to mention any more. The reality is that…,China’s new birth rates are “falling off a cliff”. A growing number of Chinese scholars and economists are saying that 2021 will see the peak of the country’s population growth, even when citing China’s official data….China will officially have more deaths than births for the first time this year. China’s shrinking population could last many decades before the trend reverses – if there’s any reversal at all…In early 2020, state media the People’s Daily listed the top 10 rumours for 2019 – one being an argument by renowned demographer Yi Fuxian that China’s population had peaked in 2018.

My Comment : The cat is slowly coming out of the bag! As per Yi Fuxian, China’s population has already started declining. The demographic bomb has started imploding.  If this is even partially true, the real China is far different from the one we are even thinking of. This is not the last we will hear about this subject. 

  

Headline: Property tax concerns for China’s homeowners, buyers amid Xi Jinping’s common prosperity drive @https://www.scmp.com/economy/china-economy/article/3156951/property-tax-concerns-chinas-homeowners-buyers-amid-xi?module=AI_Recommended_for_you_LI&pgtype=homepage

Extract : …and after China announced plans to roll out a nationwide property tax to help address wealth inequality, concerns were raised if it will become the last straw to break the back the beleaguered real estate sector and become a move that would deal a blow to the domestic economy that could trigger a domino effect worldwide.

 

My Comment : Property is almost 30% of China’s GDP. Property is the common man’s saving for life. So far it was not taxed. So people his their wealth. Introducing a tax has many implications….A wobble here implies China wobbles. The whole property sector is in a wobble. Again… this is not the end of the story…China’s economy is driven by exports and property. If these falter, China will be in a real mess.   

 

Headline: China facing ‘quasi-stagflation’ risk as rising factory prices increase pressure on slowing economy @ https://www.scmp.com/economy/china-economy/article/3156929/china-facing-quasi-stagflation-risk-rising-factory-prices

                               

Extract: With the economy facing “periodic, structural, and cyclical constraints” amid rising concerns over upcoming growth prospects, China could enter into a period of “quasi-stagflation”, a central bank adviser has warned…Stagflation is a situation in which low economic growth and high inflation occur at the same time, potentially leading to higher unemployment and lower wage growth. Policymakers and advisers are becoming increasingly concerned about China’s growth prospects and Beijing has stepped up its efforts to deleverage the property sector and curb the risks posed by off-balance borrowing, the so-called hidden debt by local governments.

 

My Comment: Stagflation is the Virus word in economics and the real gorilla in the room to invoke dread. CNBC came out with a report early in Nov that China is already into stagflation. The SCMP article is a softer version of the CNBC report @ https://www.cnbc.com/2021/11/01/china-economy-shows-signs-of-stagflation-price-inflation-economists.html  .  

 

Headline: China’s small businesses are desperate for a lifeline, but tax cuts are ‘just sweeteners’ amid dwindling demand @ https://www.scmp.com/economy/china-economy/article/3156683/chinas-small-businesses-are-desperate-lifeline-tax-cuts-are?utm_source=copy_link&utm_medium=share_widget&utm_campaign=3156683

 

Extract : “40 per cent of small-medical-device retailers in the city (Shenyang) have permanently closed down in the past two years due to dwindling revenue and unchanged operational expenses”.

China’s small and medium-sized enterprises (SMEs) – accounting for half of the country’s tax revenue, 60 per cent of gross domestic product (GDP), 70 per cent of technology innovation and 80 per cent of urban employment – have been bearing the brunt of the economic downturn brought by the pandemic, despite tax and fee cuts from the government… The situation has not improved in 2021, and for some it has worsened. Apart from lockdowns brought by sporadic outbreaks, fresh challenges have continued to mount – weak domestic consumption, high raw-material prices, soaring freight costs, regulatory crackdowns on various sectors, and a power crunch that has affected more than half of China’s provinces…“The zero-tolerance policy [against the virus] has had a huge impact on the so-called contact service industries, including the food and beverage industry and tourism,”…The lagged impact of nationwide power rationing in late September likely resulted in cuts to orders and production. In addition, surging raw-material costs continued to erode SME manufacturers’ profitability, weakening investment appetites.

 

My Comment: The situation is serious and can not be ignored when seen against the stagflation report. It has prompted the Chinese Premier Li Keqiang to address the small businessmen along with local government heads to seek solutions and prepare them for headwinds! @ https://www.scmp.com/economy/china-economy/article/3157116/li-keqiang-meeting-local-government-heads-shows-beijing-high . Does it sound like a economic super power which has dodged the virus?

 

Overall Comment : The sum of all these reports is that China is facing a slowing economy, dwindling population, poor consumption and technological barriers. All these are being strangled by the omnipresent Virus. Why are the Chinese so scared of the Virus? Simple. They know it best since it came out of their system. They are the most vulnerable to it. If they let the guard down they will be ravaged by the virus. If they continue extreme social distancing from the world and internally, they will be by passed. Very interesting times ahead.