That brings us to the next major challenge that the Chinese economy is facing: declining exports. After property, exports are the next biggest portion of their economy.
However, these are also declining significantly, for 2 reasons.
First, their main exports are goods, rather than services. However, after lockdowns ended around most of the world, people already had all the goods they needed. No one wanted to buy computers and blankets anymore, they wanted to go out and have the EXPERIENCES they’d been missing out on. They wanted to go to movies, see live sports, eat at restaurants… but China doesn’t really benefit for that kind of spending outside of China. They MIGHT have benefitted from increased travel, but their travel restrictions were so strong that they mostly shut that off.
The second reason their exports are down so much is that companies and governments around the world are trying to diversify their supply chains away from China.
Production is moving to Vietnam, Mexico, and many other places, which could place downward pressure on Chinese exports for years.
That brings us to the next major challenge that China faces: geopolitics.
I think that Western support has been an underappreciated tailwind boosting Chinese growth over the past few decades, and the increasing tensions are going to flip that from a tailwind to a headwind.
For YEARS their growth was boosted by Western companies sharing technology with them, or, in come cases, them stealing it. Western businesses have seen the big growth opportunity in a China that was reforming and opening up, and lobbied politicians for China-friendly policies.
That is DEFINITELY not the case anymore. “Tough-on-China” is basically the ONE thing that the Republicans and Democrats can agree on these days, and there’s a pretty similar sentiment throughout most of the world. Let’s not forget… even India banned pretty much ALL of the major Chinese apps in 2020.
Rising skepticism toward China, falling investment, increasing restrictions, and diversifying supply chain are ALL going to negatively impact China’s growth going forward.
#china #exports #economy #fundamentalsoffinance
