Gaza
The world was presented with two alternative approaches to the Gaza War this week. The first was brokered by China. The second was outlined by Benjamin Netanyahu in an address to a Joint Session of the US Congress.
The first was supported by the feuding leaders of Hamas, the Palestinian Authority, 12 other Palestinian factions and a big chunk of the Global South. The second was received with a standing ovation by America’s Republican lawmakers but boycotted by dozens of Democrat Congressmen.
The Chinese-brokered deal is aimed at ending the schism between Fatah which rules the West Bank as the Palestinian Authority and Hamas which has governed Gaza since ejecting Fatah in 2007. The bitter split between the two has been one of the chief obstacles to implementing the much sought after two-state solution.
On Tuesday the Palestinian factions agreed to form an interim reconciliation government. They also agreed to jointly demand a ceasefire; a total withdrawal of Israeli forces from Gaza and the West Bank; elections and they established the bones of a reconstruction programme for Gaza.
On Thursday, Netanyahu denied that Israel was blocking aid to Gaza; claimed that only a few civilians had died; called for the total destruction of Hamas; made no reference to the two-state solution and insisted that a post-war Gaza should be a “demilitarised and de-radicalised” enclave under Israeli military control.
Among those boycotting Netanyahu’s address was former Speaker of the House Nancy Pelosi. She described his speech as “by far the worst presentation of any foreign dignitary invited and honoured with the privilege of addressing the Congress of the United States.”
Ukraine
Another visitor to Beijing this week was Ukrainian foreign minister Dmytro Kuleba. It was the first visit to China by a Ukrainian official since the Russian invasion, and indicates a Ukrainian shift in emphasis from the military to the diplomatic.
The Ukrainians see the Chinese as the only third party power with any leverage over Vladimir Putin. Kuleba told his Chinese counterpart Wang Yi that Ukraine was ready to negotiate in good faith, but he added: “No such readiness is currently observed on the Russian side.” Wang agreed that that the “conditions and timing are not yet ripe.”
Vladimir Putin, for his part, is sticking to his demands that Ukraine handover the four regions his troops have occupied in eastern Ukraine; promise not to join NATO and agree to demilitarisation.
There are currently an estimated 600,000 Russian troops in Ukraine with another 600,000 expected to be deployed this year. Despite the huge numbers, the Russian gains have been limited. But President Volodomyr Zelensky is concerned about the continuing Russian build up and the threat of diminishing support by the US.
The Ukrainian and Palestinian visits have wider implications for global diplomacy. They both represent Chinese efforts to insert them into traditional American spheres of influence. Chinese foreign policy is largely guided by the impulse to disrupt and undermine American diplomacy whenever and wherever possible and to offer China as an alternative diplomatic partner to the US.
China
Every morning the many parks and open spaces in China’s cities are filled with neat little rows of elderly Chinese practising the balancing and stretching exercises of Tai chi or Oigong.
There are so many that the casual visitor might conclude that China is filled with old people. They would not be too far wrong and this is becoming a growing problem for the country’s communist rulers.
When Mao Zedong took power in 1949 China’s fertility rate was 6.11 children per woman. This was balanced by life expectancy of only 44 years. As social conditions gradually improved so did people’s life expectancy. The population started to spiral out of control. So, in 1979 the authorities introduced the one-child policy.
Well, every decision has a consequence, and the result of the one-child policy was an unaffordable rise in the elderly as a proportion of the population. Today more than 20 percent of the Chinese are aged 60 and over. By 2050 the figure will be a staggering 40 percent. China has the fastest aging population of any country anywhere.
This has enormous social and economic consequences for the world’s second most powerful country. How can the country’s health services cope? Where will the government find the money to pay the state pensions? Where will the authorities find the workers to support the retirees?
Because Chinese is a newly developed country it was unable in the past to invest in pensions and health infrastructure to support their future aging population. Pensions are therefore financed not by past contributions, but by people in the existing workforce. At the moment there are eight Chinese workers for each retiree.
How is the government dealing with the problem? For a start it abandoned the one-child policy in 2016 and replaced it with a two-child policy. In 2021 this was in turn superseded by a three-child policy.
That will potentially mean more workers in the future, but not nearly enough. The age problem is exacerbated by China’s extremely low pension age. Blue collar men retire at 55 and women at 50. White collar male workers retire at 60 and women at 55. This was fine when the average life expectancy was 44. But it is now 78 and within a few years it will reach 80.
This week the government published a report proposing a gradual increase in the retirement age over the next four years. No specific ages were mentioned, but it is understood that the authorities are aiming for an across-the-board retirement age of 65.
This has predictably led to general outcry. Young people are concerned that keeping people in the workforce longer damages their promotion prospects. And the elderly are angry at the prospect of having to work longer for their pensions.
But if nothing is done to deal with the growing and inescapable problem of the elderly then the Chinese Communist Party’s political, economic and social plans could be dashed against the walls of a thousand old people’s homes.
* Tom Arms is foreign editor of Liberal Democrat Voice and author of “The Encyclopaedia of the Cold War” and “America Made in Britain".
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15 Comments
Thank you for an article which is more interesting, relevant and thought provoking than most in the main stream media, including the B B C.!
If China, like us, is has a sovereign currency, might its government create money to help a potential or actual problems, as we do?
Might it be that in China, life expectancy is increasing and here it is not?
Ditto citizen/child hunger?
Might more efficient, citizen focussed governance help?
Ditto attractive, part time paid work for the more mature?
@ Tom,
“….Pensions are therefore financed not by past contributions, but by people in the existing workforce. At the moment there are eight Chinese workers for each retiree.”
China, in this respect, is no different to anywhere else. Pensioners are always supported by the efforts of the current workforce no matter what contributions might have been made previously. It can’t possibly be any different.
The lower the ratio of workers to non workers the harder it is to provide the necessary support.
Tom Writes “Chinese foreign policy is largely guided by the impulse to disrupt and undermine American diplomacy whenever and wherever possible and to offer China as an alternative diplomatic partner to the US”.
There is no doubt that the CCP sees itself in competition with the USA and as the most powerful economic and military nation in East Asia.
The question that arises is this such a bad thing. China (unlike Russia) is embedded in global trade and shares the same goals as the US, Europe and East Asia of maintaining global political and economic stability.
If the United Nations is ever able to achieve its mission of preventing warfare then Political and economic alliances like Asean, the EU, Nafta and the TPP need to be able to agree a common set of rules based on free trade.
Trump made a big mistake in taking the US out of the Trans-Pacific Partnership advocated by Obama and imposing tariffs on Chinese and EU imports. He has left US farmers crippled with little prospect of recovering their pre-covid export markets. The Biden administration appears to have been unable or unwilling to correct this error.
Tom Writes “Because Chinese is a newly developed country it was unable in the past to invest in pensions and health infrastructure to support their future aging population”
China has embraced UHC as a national health policy priority. In the past 2 decades, China has introduced several policy initiatives with the goal to provide its citizens with equitable and affordable access to good quality basic health care and adequate protection from financial risk.
It has not yet achived the kind of Universal Health coverage that Taiwan has https://www.innovationsinhealthcare.org/lessons-from-taiwan-an-aging-population/ but it is starting to get there. The lack of UHC and low pensions is often cited as a reason for China’s high savings rates. China, like other major exporters, is not solely reliant on its domestic workforce to support public and social services. Like Norway, Germany, Japan etc is has amassed considerable overseas investments that generate a stream of private and public income.
@ Joe,
” China, like other major exporters, is not solely reliant on its domestic workforce to support public and social services…..”
China may be a major exporter in total but as a % of GDP its current account surplus is only 2.25%.
So, sure, this will help a bit if it ever needs to reverse the process to become a net importer and so support an elderly population but the vast majority of it will still have to come from its own domestic workforce.
Also it’s one thing to acquire a large number of IOUs from the debtor nations such as the USA and the UK. It’s another to make good on them. We, in both the UK and USA, are already having our own problems with elderly populations. Those IOUs may not actually turn out to be worth very much if and when when the Chinese attempt to cash them in.
https://en.wikipedia.org/wiki/List_of_sovereign_states_by_current_account_balance
Joe…Those tariffs remain in place because China hasn’t met the targets put down by the Trump administration….As Biden said in a press conference:
“I’d like to be able to be in a position where I can say they’re meeting the commitments, or more of their commitments, and be able to lift some of it. But we’re not there yet,”
Not a question of being unable to lift those tariffs – he has stuck to Trumps targets set for China..
@ Joe,
“Trump made a big mistake in taking the US out of the Trans-Pacific Partnership advocated by Obama and imposing tariffs on Chinese and EU imports”
You’ll know I don’t support Trump but the Americans, regardless of who’s President, do have a case in complaining about European and Chinese trade practices.
For example: The US imposes a tariff of 2.5% on European passenger cars and car parts, while the EU taxes American cars wit 10%. It will be a similar story with all trade including agricultural produce. The EU is exactly known for it’s relaxed attitude to trade.
The EU likes the idea of free trade – but only when it’s exporting!
Peter,
Chinese outward investment is focused on mining, minerals, infrastructure and farmland across Latin America, Africa and Central Asia.
These investments dwarf holdings of US and UK government securities.
“Rare-earth mineral extraction will likely create a competition between Washington and Beijing in the developing world, from Latin America and Africa across the Eurasian landmass. In this modern gold rush, for now, Beijing holds a strong early advantage. To catch up, American policy makers must treat the security of rare earth supply chains in the same way that we once treated our crude oil and natural gas imports in the pre-shale era: a matter of vital national security” https://www.forbes.com/sites/arielcohen/2021/06/02/chinas-journey-to-the-center-of-the-earth/.
@ Joe,
What you are saying in your last comment is true. But when you wrote that China was a major exporter I don’t think anyone took you to mean capital exports to Africa.
Of course, anything that can be done to strengthen a domestic economy is worthwhile but the demographic factor is always going to be of prime importance when considering the ability of any society to support its elderly.
Warren Mosler points out what should be the obvious to all when he writes:
“…….With this last statement it all goes bad. They assume that the real problem of fewer workers and more retirees, which is also known as the “dependency ratio,” can be solved by making sure the retirees have sufficient funds to buy what they need.Let’s look at it this way: 50 years from now when there is one person left working and 300 million retired people (I exaggerate to make the point), that guy is going to be pretty busy since he’ll have to grow all the food, build and maintain all the buildings, do the laundry, take care of all medical needs, produce the TV shows, etc. etc. etc. What we need to do is make sure that those 300 million retired people have the funds to pay him????
I don’t think so! This problem obviously isn’t about money ”
https://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
Peter,
US politicians have always been arguing about unfair international trade agreements or excessive trade deficits on the grounds of jobs moving abroad.
In the 1980s, the US had a lvery large trade deficit with Japan. Trump back then was arguing that Japan was not paying enough for the security that the USA provided and should effectively return its surplus to the USA to cover the cost of stationing the US military in and around Japan. That argument won’t work with China.
Japan has had a severe aging problem and stagnant economic growth for decades. One of the key reasons it has been able to maintain high levels of public sector deficits and social security is its trade surpluses and the high level of overseas investments that Japanese businessess were able to make during their post-war economic boom.
The Chinese economy has also grown on the back of export led growth. The trade surpluses that are generated see Chinese firms investing heavily overseas and these investments generate streams of income that support domestic spending as the workforce ages and declines. This is what has hapended with Japan until now and China will likely experience a similar trajetory as its workforce contracts.
As a consequence of large trade deficits the USA has seen very low real wage growth for decades. This is a key part of the reason we have seen rise of populism in the so called rust belts of Western indutrial economies.
@ Joe,
I’m agreeing with you insofar that you are suggesting that it could make sense for a country to run a trading surplus for a time when it doesn’t have a demographic problem of ageing population so that it later can then run a deficit when it does start to have one.
In other words it exports more than it needs to import when it has plenty of workers, but once those workers retire it switches to importing more than it exports.
So accordingly we should be expecting Japan to now be running a trading deficit. That would make sense. Except it isn’t!
It should be economics 101 that the reason to export something valuable is to be able to import something valuable in return. Exports are a real cost so it doesn’t make any sense to always run a trading surplus.
What’s the point of earning money if you are never going to spend it?
https://en.wikipedia.org/wiki/List_of_sovereign_states_by_current_account_balance
Japan’s current account surplus is around 2% i.e. not excessive by any means.
The New York Times writes Japan Wanted Higher Inflation. It’s Here, and It Hurts
“Japan’s economy is faltering after a rise in prices led consumers to cut back on spending.”
The economist published an assessment of the Japanese economy in March this year Why Japan’s economy remains a warning to others“Low real rates, low growth and high debts are not going away”
“Rock-bottom real rates reflect the fact that Japan has abundant savings, partly because its population is so old—30% are over 65. Firms struggle to put these to productive use, because an economy with a shrinking population has less appetite for capital investment.
The debt-to-GDP ratio is 255% in gross terms, or 159% after netting off the government’s financial assets; both measures are the highest in the rich world. Even with low interest rates, nearly 9% of the government budget is spent on debt interest. Japan could not withstand a monetary tightening anything like as severe as the one in America, where rates have reached 5.25-5.5%.
Long before they got to such levels in Japan, the government would have to reduce its deficit, which was 5.6% of GDP in 2023. The economy would cool from fiscal belt-tightening, not higher rates. With monetary policy, as with growth, there remains only one path by which Japan will cease to be exceptional: if the rest of the world comes to resemble it”
Maybe China will follow the same path as Japan, but the results are likely to be the same.
Though discussion of individual countries’ pollitics is interesting shouldn’t we be devoting more articles at the global challenges they all face? Without a greater global emphasis on these we risk leaving issues like climate change, immigration, inequality, pandemics and conflict to our international organisations that don’t seem to have the capability to tackle them within required timelines.
@ Joe,
Prof Bill Mitchell has done considerable research into the Japanese economy. I don’t think he disagrees with yourself and the Economist completely but his reasoning looks a little different.
Incidentally, it’s odd how we can nearly always find some eminent economist who will back up our own take on what’s happening!
I wonder why that is? Maybe Rachel Reeves can find someone to agree with her that real black holes actually exist here on planet Earth rather than being at least 1600 light years away!
https://billmitchell.org/blog/?p=61582
You say: ‘Vladimir Putin, for his part, is sticking to his demands that Ukraine handover the four regions his troops have occupied in eastern Ukraine; promise not to join NATO and agree to demilitarisation.’
Historically, a promise not to join NATO goes back to June 16, 2021, at the Russia-US summit between Biden and Putin, when Russia had longstanding concerns about plans to expand NATO. Meeting with NATO allies two days before the summit, Biden refuted an assertion by Zelensky that NATO had agreed to admit Ukraine to the alliance.
Starmer and Sunak say there is now ‘an irreversible path to membership for Ukraine’.