Chinese financial markets are off to a rough start in 2024; former US President Donald Trump advises that the US should not come to Taiwan’s rescue in a crisis; and Houthi attacks in the Red Sea pose a dilemma for Beijing.
Chinese financial markets have fallen sharply this year, owing to the COVID-19 outbreak, government incompetence, and decades of inflation in the property bubble. So far in January, mainland China’s CSI 300 Index has plummeted by 6%, the Shanghai Composite Index by 7%, and Hong Kong’s Hang Seng Index, which includes the majority of huge Chinese enterprises, has declined by more than 12%, reaching its lowest level in two decades. China is seeking to stabilise the yuan in response.
The fall has hampered Beijing’s recent efforts to paint an optimistic picture of economic revival. According to the government, China’s GDP increased by 5.2% in 2023, a low amount in comparison to decades of tremendous development but nonetheless respectable. However, economists outside China remain sceptical, with the Rhodium Group and others estimating that last year’s GDP growth was as low as 1.5 percent. China’s customary official data falsification appears to have been more common last year.
Foreign investors have propelled the stock market decline, which began in the second part of 2023 and has accelerated this year due to the disparity between China’s official confidence and the rest of the world’s pessimism. Unlike Chinese institutions, the government cannot force international investors to hold onto their shares. (Such restrictions are frequent, contributing to the Chinese stock market’s overall lack of confidence.)
Compared to the West, stock markets hold less significance in the Chinese economy, with only a small portion of family wealth invested in stocks. Despite experiencing significant volatility in 2015 and 2016, the markets had a minimal impact on the overall economy. However, China’s most important economic indicator, the property market, is performing similarly poorly. New home prices and property investment both declined in 2023 and are continuing to decline, while new home sales plummeted by 34% last year compared to 2022.
None of this suggests that the Chinese economy is on the verge of collapse. However, the psychological shock of the downturn is more severe in China than in other countries since the Chinese government and public have grown accustomed to rapid GDP expansion over the last three decades. Although some sections of China, particularly the country’s northeast, have been struggling for years, many individuals are experiencing a first-time shock.
One of the issues with so many years of tremendous economic expansion is that it was easy to ignore the mounting debts. Those loans are now coming due, and the outlook for future growth is dismal. What does the slowdown mean on a global level? A GDP growth rate of 3% per year will likely place the Chinese economy significantly behind the US economy by 2050, whereas a 5% growth rate would put it ahead.
For the first time in decades, the growth gap is widening in favour of the United States—a trend that leading Chinese foreign relations scholar Yan Xuetong predicts will continue over the next decade. That might imply a more cautious China, or a China convinced that it needs to take drastic measures, such as invading Taiwan, to avoid becoming even weaker.
Would Trump abandon Taiwan?
In a Sunday interview, former US President Donald Trump, the front-runner in the 2024 Republican presidential primary, accused Taiwan of stealing US semiconductor business and stated that Washington should not assist Taipei in the event of a confrontation with Beijing. The words may offer pause to the many Chinahawks who saw Trump’s presidency as an opportunity, some of whom continue to publicly back the former president.
As president, Trump was inconsistent with China. His administration had many officials who were strong in Beijing. However, Trump repeatedly praised Chinese President Xi Jinping, lifted trade restrictions on Chinese firm ZTE after the Trump Organisation signed financing agreements in China, and pardoned Republican fundraiser Elliott Broidy, who pleaded guilty to violating foreign lobbying laws on behalf of Chinese and Malaysian interests.
Although Xi is a well-known football lover, China remains one of the sport’s underperforming nations in terms of size. According to Chinese leaders, the problem is widespread corruption among both teams and organisers. Corruption has permeated practically every industry in China, including sports, leading to a cycle of purges and crackdowns. Authorities have arrested players, coaches, and officials on charges of match rigging and bribery.
In March, authorities jailed disciplinary officials who had overseen an earlier sweep, marking the beginning of the most recent football crackdown. This month, television aired confessions from important figures, including the former coach of China’s men’s national team. However, none of this will push China’s 79th-ranked team any closer to the World Cup. Aside from that, many talented players may be in jail.
The United States’ effort against Houthi piracy in the Red Sea has left China in a difficult position. On the one hand, the guiding concept of Chinese geopolitical rhetoric is that the United States is wrong, particularly when it employs military force. China, on the other hand, relies on marine trade and has previously worked with the United States to combat piracy.
China has been uncharacteristically quiet on the subject, criticising the Houthi attacks but not approving the US operations. Beijing has recently stated that the “harassment of civilian vessels” in the Red Sea must cease, but the end of the Israel-Hamas conflict should be a major priority. Meanwhile, the Iran-funded Houthis have promised not to attack Chinese or Russian ships, prompting Chinese ships to provide their identities to the Houthis.
Hugo Awards Controversy.
The Hugo Awards, which honour literary science fiction, are embroiled in a scandal following their event in Chengdu, China, in October. Recently leaked records show that the Hugo Awards unjustly excluded several works distributed at the annual Worldcon event based on public votes. The Hugo shortlist unjustly excluded renowned Chinese diaspora authors such as Xiran Jay Zhao and R.F. Kuang, while Neil Gaiman may have faced bans due to comments against Chinese censorship.
Before the event, figures such as Hugo winner Jeannette Ng cautioned that hosting it in China could result in censorship. Worldcon organisers have issued a succession of ambiguous remarks, seeking to avoid accountability. However, the scenario exemplifies how speech restriction frequently works in China: people self-censor to avoid potential difficulties, and international institutions eventually acquiesce.