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Monday, October 18, 2021

The Great Chinese Dream is Over? China is on a Downward Spiral on Multiple fronts

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Over the last two decades, we have witnessed a mercurial rise of China, where it has moved from the periphery to the power center of the world. Be it Economy, Military power, International relations, or Sports, you name it and China has shown its mettle in almost every domain.

China’s economy has outnumbered all growth estimates and it is now the largest one in the world, almost more than five times as large as it was 2 decades back. It has fortified its military with advanced weapons and armaments. It has shown unprecedented growth as far as Infrastructure development is concerned.

However, China’s future prospects are on a diminishing spree for at least the last 3-4 years. It has messed up its economy, its international reputation, has isolated itself in the international arena. It has left with some down-at-the-heels allies, such as North Korea and Pakistan. China is facing the biggest challenge in its modern history, and people are claiming that the ‘Great Chinese Dream has been over” and there are due reasons for that.

In this article, we will discuss several root causes which are pushing China into a downward spiral, and the road ahead is certainly not easy for China, if no course correction is made by its leadership.

China’s over-aggression

China has embodied the teachings of Sun Tzu’s ‘Art Of War’ in literal means, as it is making a series of aggressive moves to reflect the newfound global clout. It has increased the pressure on its neighbors such as Taiwan, India, South Korea, Japan, and even Australia. China is showing its presence in the South China sea and even manhandling its internal matters in Xinjiang and Hongkong.

The world is getting aware of China’s aggressive model, and they can witness how China is manifested in their daily lives. China’s debt-trap policy to snatch the strategic assets of developing nations is another example of China’s aggression. It has created a state-of-the-art surveillance state for its own citizens, and it has annexed almost every aspect of life without any institutional or legal restraint. China is openly violating the human rights of people and it moves down any attempt to support its aggression against humanity.

However, the days of this sort of aggressive dominance are over now are over.

China’s Ambitious Projects Stalled

China is also losing billions of Dollars in its ambitious Belt and Road Initiative (BRI) and CPEC (China Pakistan Economic Corridor). Apart from that several BRI partner countries have closed down the coal-powered thermal power projects funded by China due to lack of transparency, ineffective implementation, non-professionalism, and negative financial implications.

Belt and Road Initiative is Xi Jinping’s flagship project where China was supposed to spend $1.2–$1.3 trillion by 2027, but the prospects of this initiative are diminishing. Not many people know that China has initiated 52 coal-based power projects since 2014, but only one of them has got operationalized till now, whereas 25 of the projects had been shelved and eight ended up canceled, which caused massive financial loss to the Chinese government.

China lost World’s trust in COVID Handling

Well, this is certainly the biggest setback China is facing in recent times. China has comprehensively lost its international stature and its so-called image over its shoddy handling of coronavirus. Most people are believing that it is China that was responsible for this pandemic and it was not transparent about the problem since the beginning, which caused the massive loss to global economies and humanity as well.

We have seen several global surveys on China’s handling of the COVID, and it has received overwhelmingly negative opinions from all quarters. People are not even shying away from directly blaming China for this massive outbreak. People are now openly saying that China can’t be trusted anymore, and numbers coming out of China cannot be trusted, whether they are talking about COVID spread, its origin, its implications for the Chinese economy, and recovery.

China’s Self-Isolation at Global level

China has isolated itself at the global level, due to its ill-conceived policies and acts in recent times. If we look into the last 5 years, then we will find China either engaged in a trade war or military tussle with several of its neighbors and global superpowers.

The USA, Indian, Japan, and Australia came together and formed Quad, the group that will coordinate at multiple levels to reduce the Chinese dominance in the south-east Asian region. On the other hand, the USA, UK, and Australia came together to create AUKUS, which is primarily a military collaboration group to fortify the capabilities of Australia in southern Asian theatre to counter Chinese might.

Jinping’s Over-Centralization in Decision making

Chinese economic and military prominence was an outcome of Deng’s reforms which delivered high GDP growth rates for four decades. It was the policy of devolution of economic decision-making from the Party Centre to the individual citizen, worker, farmer, and entrepreneur. This policy ensured giving a way to a socialist and market economy, and open China to the outside world in the late 1970s.

Xi Jinping has coined and using the terminology of ‘common prosperity’ more in keeping with the Mao period, which reflects in the leftward lurch in the country and its policies. We can say that Xi is moving in exactly the opposite direction.

He has re-centralized the political power and become the single power center in the country and now he is implementing the same with the economic paradigm as well. These tectonic shifts in the decision-making have created a feeling of uncertainty among the political, military, and entrepreneur classes of China, and this situation can explode in the future.

China’s brutal crackdown on its own Enterprises

China may be the only country in the world, which cracks down on its own global enterprises and ensure they are done and dusted. It started with Jack Ma’s Ant group, whose public listing was quashed by the Chinese government on the behest of President Jinping.

He only criticized the CCP government for lacking innovation, which put him on the radar of the Communist Party, which is known for demolishing dissenting voices.

Beijing has also brutally cracked down on more than 30 companies in its booming Education technology sector. Several technology giants such as JD, Didi, Tencent, Meituan, Baidu have to bear the brunt of the Chinese government’s tough stance. The government has taken severe action against its own enterprises, and it is giving all the wrong signals Clearly, the economic measures taken in recent months against some of the richest and most successful Chinese entrepreneurs, have very significant political implications.

The Exodus Of Chinese Manufacturing

China has become the manufacturing hub of the World due to its cheap labor, optimized shipping lanes, effective supply chains, and the government’s constant support.

However, in the last couple of years, Chinese manufacturing got a massive hit due to several historical issues and emerging challenges such as increased geopolitical tensions, high tariffs, and mishandling of Covid-19, that have resulted in a mass exodus of many global brands from China, and initiated the downfall of the country’s manufacturing dominance.

As Chinese manufacturing’s decline is evident, several Southeast Asian countries such as India, Taiwan, Indonesia, Thailand, Australia, Mexico, and even Brazil are gearing up to take over some of the Chinese business.

Investors are in staying away from China

Some analysts have warned it is becoming too risky to invest in Chinese companies, given the unpredictability of the Chinese government’s crackdowns. Chinese markets have also performed much worse than most of the other stock indexes across the globe.

The Hang Seng index has dropped 5.9 % since January 1, wiping out all its gains in the year to date. The Shanghai Composite, meanwhile, has lost 0.5 %. Initially, many investors had become “complacent” about the risk of investing in Chinese stocks, assuming the tech giants were “too big to touch”. There was a feeling that the Chinese Communist Party won’t touch or won’t bring back under its control if it feels that’s necessary.

But all these feelings are gone for the toss in recent times, and this has created a sense of concern in investors and they are staying away from China.

China’s Infrastructure Bubble is about to Burst

Once a symbol of glittering success in the most exciting property market on the planet, China Evergrande is now tanking and dragging many of its competitors with it, as global investors and creditors desperately attempt to parachute out of the troubled Chinese property sector.

Evergrande is China’s biggest property group and the world’s 122nd largest company by sales. This company is engaged in fighting off hordes of angry creditors, fighting court battles, and desperately trying all means to secure finances to survive. Now the situation has taken a sudden turn for the worse.

Just a couple of years back Evergrande was the world’s most valuable real estate group, but now it has become the world’s most indebted property developer, owing more than $US300 billion ($403 billion). The Chinese government is also not trying to help this company, and it is bound to fall, which could trigger a massive economic crisis in China, and may have a cascading effect on the World’s economy as well.

Well, these are some prevalent issues that are causing anxiety about China’s future, and if the Chinese Government doesn’t mend its way, then it could cause a massive downfall of China and may destroy the Great Chinese Dream.

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