Observations of an expat: Shrinking China

China is shrinking. India is growing. Sometime this year the sub-continental nation will usurp China as the most populous country on earth.

This and a number of other ineluctable facts will have a profound impact on China, India, Asia and the rest of the world.

Every economy needs workers to produce goods and services.  The more workers – especially relatively cheap ones – the faster a country’s GDP grows.

There are other factors at play. China’s pensioner population is rapidly growing. The proportion of retirees has expanded from 37.12 percent in 2010 to 44.14 percent in 2020 which means fewer workers and .greater social care costs. India, by comparison has an average age of 29.

Then there is covid. Xi Jinping’s decision to end his zero covid policy has let loose the deadly virus at the same time as hundreds of millions are travelling for Chinese New Year. To make matters worse most of the travellers are young people going from covid-infected cities to visit vulnerable elderly relatives in the less affected rural areas.

According to the University of Beijing, 900 million Chinese have been infected with the covid virus. The exact fatality figure is a government-protected secret. But it is known that healthcare services have been stretched beyond breaking point.

The pandemic has forced the closure of many Chinese production facilities and this year growth is expected to be only 3.2 percent. This is higher than the US, EU and the world average, but China starts from a lower base and the Chinese Communist Party’s hold on power is built on ever-improving living standards. The World Bank is predicting 6.9 percent economic growth in rival India.

Beijing’s mounting domestic problems – short and long-term – will force the Chinese Communist Party to focus its attention on internal issues. These means fewer foreign adventures and an effort to stabilise relations with the US, Europe, Japan and elsewhere. A recent visit by German Chancellor Olof Scholz was seen as a big win for the EU and other visits are planned by French President Emmanuel Macron and Italian Prime Minister Giorgia Meloni.

Sino-Australian relations are also rapidly thawing and the threat of full-throated Chinese support for Putin’s war in Ukraine is rapidly receding.

China’s “Wolf Warrior” diplomats who have been stoking the anti-Western fires have been sidelined. Their chief voice, Zhao Lijian, has been moved from spokesperson for the foreign ministry to the less visible job of Deputy Director of Boundaries and Ocean Affairs. At the same time the more pro-Western Qin Gan has been shifted from ambassador to the US to foreign minister.

Coinciding with all the above has been a move by Western governments to repatriate their production facilities in the name of economic security. Concern about Chinese domination of world manufacturing had been vexing Western governments for some years. But it was Russia’s stranglehold on European energy that set off a political tsunami against decades of globalisation.

President Joe Biden has responded with a $430 billion package protectionist package to attract and develop green technologies and a $280 billion package to build up America’s computer chip industry.

The US moves will definitely hit the Chinese, but they have also drawn howls of protest from the EU, South Korea, Taiwan and Japan. Brexit Britain is expected to be especially hard-hit as the Brexiteers were counting on free trade to sustain the economy outside the EU. The outlook for the smaller free-trading economies will worsen as Brussels retaliates against American measures.

World consumers will also be affected. Moving production from China to the more expensive labour markets of Europe and the US will, according to World Bank economists, add at least five percent to the average consumer product.

Since China joined the World Trade Organisation in 2001 it has embedded itself in the international trading system. Last year it was responsible for 30 percent of the world’s manufacturing. Many Western companies and the world shipping industry are reliant on Chinese industry. A rapid shift away from Beijing as a result of demography, disease or politics will cause a major disturbance and require painful readjustment.

* Tom Arms is foreign editor of Liberal Democrat Voice and author of “The Encyclopaedia of the Cold War” and “America Made in Britain". To subscribe to his email alerts on world affairs click here.

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6 Comments

  • Peter Martin 21st Jan '23 - 1:02pm

    @ Martin,

    “This week’s inevitable demise of BritishVolt is an emblematic failure.”

    Yes. If the Government is going to insist, and rightly so in my opinion, that we should move to EVs then it should take some responsibility to ensure that there is a British EV car industry, which includes a battery industry too. If need be then this should include a degree of State control.

    Yet somewhat ironically, the British Government, having left the EU, is still sticking closely to the official EU line that there should be no distortion of markets with the provision of State aid, whereas those governments which are still a part of the EU are largely getting on with what needs to be done and ignoring their own directives.

    If they aren’t totally ignoring them they will be finding enough ‘wiggle room’ in the small print.

    https://competition-policy.ec.europa.eu/state-aid/state-aid-overview_en

  • Xi Jinping’s decision to end his zero covid policy has let loose the deadly virus at the same time as hundreds of millions are travelling for Chinese New Year.

    A decision made for him by people paying bribes at testing stations to get negative results. It was not realistic to stop an aerosolised virus with an R0 of 18 to 20. Current Omicron variants are less pathogenic than a mild flu. The most pessimistic estimate for China puts the Infection Fatality Rate (IFR) at 0.07% (1 in 1,400). Having wisely rejected mRNA “vaccines” it will be interesting to see if China goes endemic…

    ‘Lessons from China and Africa’ [17th. January 2023]:

  • Rif Winfield 22nd Jan '23 - 11:11am

    Tom, you state “Beijing’s mounting domestic problems – short and long-term – will force the Chinese Communist Party to focus its attention on internal issues.” This is precisely why it will NOT shift its focus onto domestic affairs, but instead will try and divert public attention onto external matters, as demonstrated by its increasingly bellicose attitudes over Taiwan.
    The balance of your article is fine, and you are right to mention the growth of India in terms of both population (including working age population) and economics. It is now likely that, given the extrapolation of current trends, India will not only have the largest population but also the largest economy in the world by the middle of this century. And we do have to pay careful attention to the increasingly authoritarian moves of the Modi government and question where that is leading, because that is going to have serious implications for us and the rest of the world.

  • Peter Hirst 22nd Jan '23 - 4:26pm

    The third kid on the block is Africa. It is increasingly becoming a force in international politics and acting as a unified force. The effect of this means that perhaps it will counter balance India. In an uncertain world it seems Europe ( and the USA) will matter less and so will need to cooperate closer to have the same impact.

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