31/05/2020
- China’s leadership has made it clear to its people that the world will become more dangerous and they must be prepared for hard times
- Beijing’s relatively small stimulus response to Covid-19 suggests it wants to save its economic policy ammunition for a bigger battle
China opted not to set a GDP target for 2020. Photo: Xinhua
Beijing’s decision not to set an annual GDP target for 2020 – for the first time since 2002 – is a sign it is putting stability ahead of growth as part of its preparations for an escalating conflict with the
United States.
Economic development has always been the central theme for Beijing since it established diplomatic relations with the US in 1979. But this year it has given priority to job creation and tackling poverty. The coronavirus outbreak might appear to have been the reason for the shift, but the underlying factor is the tension with the US.
Covid-19 offered a preview of what a decoupling of China and US might look like: aircraft grounded, cargo flows disrupted, value chains broken, goodwill and cooperation lost, blame games started.
Both countries have suffered heavy human and economic losses from the coronavirus, yet that did not inspire them to work together. Instead, hostility and rivalry has thrived, and neither wants to blink first.
The Chinese leadership has made it clear to its people that the world will become more dangerous and they must be prepared for hard times. As such, the government is saving its economic policy ammunition.
While the stimulus plans introduced in the US, Germany, Japan and France exceed 10 per cent of their national GDP and interest rates have been cut to the bone, Beijing stopped at just 1 trillion yuan (US$140 billion) worth of special treasury bonds and 1.6 trillion yuan of additional local government bonds. In total, about 2.6 per cent of GDP.
Interest rates in China – 2.7 per cent on 10-year bonds – are some of the highest among major economies.
China’s 6.6 per cent defence spending boost lowest in three decades
China’s budget fiscal deficit has increased to 3.6 per cent of GDP for 2020, but the larger deficit is mainly from tax and fee cuts instead of increased fiscal expenses, except for an increased military spending.
Beijing is calling on provincial and local authorities to tighten their belts, which is unusual for a government that has huge assets and can increase spending at any time through quantitative easing.
So why is the government, which is known for intervening in the economy, being so restrained?
It is bracing itself for a perceived period of turbulence and hardship as its relationship with the US turns sour. It is putting jobs and social stability on top of its agenda, instead of growth.
Beijing is refraining from excessive spending, eliminating sources of potential instability, making appeals to the most vulnerable social groups, and saving its power for a bigger test.
Against that backdrop, the National People’s Congress passed the national security legislation on Hong Kong. Beijing knew the bill would anger the US, but did it anyway.
Hong Kong is known as China’s gateway to the international capital market and the largest offshore yuan market, but Beijing is ready to trade losses on the financial and economic front for potential gain on a fortified national security fence.
All this points to the suggestion that Beijing is preparing for the possibility of decoupling from the US, even if it doesn’t necessarily want to.
The threat of a new Cold War is clouding the world. The theme of life for one or two generations of people on both sides of the Pacific may shift from growth and prosperity to struggle and confrontation.
China and the US have yet to collide totally, but that moment is drawing near.
Source: SCMP
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24/05/2020
- Countries must respect each others’ systems and be wary of US political forces who want to ‘hijack relations’, Wang tells press conference at ‘two sessions’
- Beijing is not looking for confrontation and wants to work with Washington to fight coronavirus, minister says
Foreign Minister Wang Yi said China did not want to replace or change the US. Photo: Xinhua
China and the US should try to avoid a new cold war and find new ways to cooperate despite their differences, China’s Foreign Minister Wang Yi said on Sunday.
“We need to be alert to efforts by some political forces in America to hijack China-US relations and who try to push the two countries towards a so-called ‘new cold war’.
“This is a dangerous attempt to turn back the course of history,” Wang told a press conference on the sidelines of the annual parliamentary meetings known as the ‘two sessions’.
Ties between the two countries have further worsened due to escalating tensions over the handling of the Covid-19 pandemic.
Voices calling for decoupling have been on the rise in the US, with some arguing that the two countries are edging towards a new cold war akin to that against the Soviet Union.
Wang called for the two countries to respect each other’s political systems and to find a way to get along despite their differences.
The two nations should step up cooperation on global pandemic control, and coordinate on macro policies to deal with the economic impact.
“China has no intention of changing the United States, much less replacing it. The US should give up the wishful thinking that it can change China.”
“For the benefit of the two peoples, as well as the future and well-being of humankind, China and the US should and must find a way to coexist peacefully despite the differences in system and cultures of the two societies.”
Wang said China will not seek confrontation with the United States, but China is determined to protect its sovereignty, territorial integrity and development.
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