As China launches itself with gusto into the Year of the Rabbit, there is increasing commentary that we may have seen peak China in 2022 when, in October, President Xi Jinping was anointed for a third term as leader of the Chinese Communist Party.
It might be time to revise the country’s rise.
Since Xi’s triumph, it’s all been bad news. China faced its second-worst economic performance since the death of Mao Zedong, a global downturn, and the ramifications of its disastrous sudden exit from its zero-COVID policy. This is taking place within an increasingly tense regional security environment, underscored by Japan’s recent commitment to a major military upgrade.
Downswings and roundabouts
The zero-COVID policy, which featured harsh lockdowns and constant testing, was a nightmare for Chinese citizens. Official death toll figures are in the tens of thousands — but according to a mass of anecdotal evidence regarding overworked crematoriums and overflowing hospitals, those are probably not the real numbers. Official data also does not include people who die at home, and doctors have said they are being discouraged from putting COVID on death certificates.
Things also look dire economically. On the back of its COVID policies, China’s economy grew by only 3% in 2022, down from 8.1% the previous year, missing Beijing’s official growth target of 5.5% — already the lowest in decades. Apart from 2020, the first pandemic year when full-year GDP expanded by just 2.2%, the nation’s growth was the weakest since the last year of Mao’s rule in 1976.
Still, many economists confidently predict the Chinese economy will rebound after the harsh initial wave of COVID infections, injuries and deaths — with a rider.
“The change of this COVID policy will revive the economy,” European Bank president Christine Lagarde said. “That is positive for the rest of the world, but there will be more inflationary pressure.”
Inflation and interest rates are already a problem for the Albanese government, as Australians with mortgages get squeezed and many landlords pass these increases on to tenants. Any new inflationary pressures will only increase the headache for Canberra.
Not enough babies
Demographically, China faces a nightmare brought about by its one-child policy, with the government admitting its population was decreasing for the first time since the Great Famine in 1961. At the end of 2022, China was home to 1.41175 billion citizens, compared with 1.41260 billion a year earlier — a drop of 850,000 people. It’s the first time China has recorded fewer than 10 million babies a year since 1950.
It’s a trend that will continue. Birthrates remain stubbornly low, despite the government’s serial relaxation of policies restricting the number of children couples can have. They are now allowed three, but a combination of factors — including rising cost of living, a lack of education, living costs, and nationwide barriers to job mobility — has led to a widespread population downturn. Chinese child-bearing-age women also grew up in one-child households, which have become engrained and normalised.
China faces the very real prospect of ageing before getting wealthy, all but ensuring its middle-income population is economically trapped. As there are fewer workers of the right age available to work in factories, companies are moving production to other low-wage countries such as Vietnam, India and Bangladesh. This trend has been exacerbated by countries and companies keen to cease or wind back their use of China as a manufacturing destination, known as decoupling.
Effect on Australia
None of this is particularly good news for Australian exporters who for many decades have relied on Chinese growth for much of its prosperity, underpinned by resources exports to China.
There is some upside though as, due to its recent bans and tariffs, China has demonstrated it can, perhaps inadvertently, force Australian exporters to look for new markets. China is also trying to diversify its imports away from its heavy reliance on Australia for iron ore, and in early January Rio Tinto said it had agreed on terms with joint venture partners, including giant Chinese steelmaker Baowu, to develop infrastructure for Guinea’s Simandou iron ore mine.
The better news in this context is the increasingly warm relations between Beijing and Canberra, with the latest sign of a thaw being the announcement last week that Chinese Commerce Minister Wang Wentao and Australian Trade Minister Don Farrell would soon talk via video conference about trade restrictions.
Defence talks
Into the mix of China’s malaise came Japan’s recent announcement that it would throw off its postwar pacificity and re-arm with some purpose.
Japan’s military budget will increase by 56%, from about 27.47 trillion yen over five years to about 43 trillion yen (an increase from about $304 billion to $476 billion). By comparison, Australia’s defence budget is $48.7 billion in 2022-23, or 1.96% of gross domestic product, and is budgeted to rise to $52.16 billion in 2023-24, $54.23 billion in 2024-25 and $56.55 billion in 2025-26.
That was confirmed — and the program publicly supported by the US — when Japanese Prime Minister Fumio Kishida recently visited Washington for talks with US President Joe Biden. This introduces a tough new dynamic to China’s regional security calculations and, understandably, Beijing is not happy.
“Since Kishida’s government updated its security strategy last month in contravention of its exclusively defence-oriented policy, its series of actions have increasingly raised alarms among its Asian neighbours, said local scholars, urging the government to change its relations with the United States from ‘subordination’ to ‘self-reliance’,“ said state news agency Xinhua.
For Australia, it’s the latest shoe to drop in the emerging regional security network that aims to try to contain China. Japan has said it wants to leverage the pre-existing Japan-Australia Joint Declaration on Security Cooperation to deepen cooperation, “second only to the Japan-US defence cooperation”, wrote Stephen Nagy, senior associate professor at the International Christian University in Tokyo, for the Australian Institute of International Affairs.
This includes deepening consultations at all levels including ministerial consultations, bilateral/multilateral training and exercises, and defence equipment and technology cooperation. It will also include joint military exercises and rotational troop deployment in Australia.
China will continue to build its economic influence in the region, a program that Australia has had difficulties both coming to terms with and attempting to counter — at least in terms of Papua New Guinea and the Pacific and its welter of small nations.
The rabbit is the 12th, last and luckiest animal in the Chinese zodiac. It’s a symbol of longevity, peace, and prosperity, meaning 2023 is expected to be a year of hope and peace. But the confluence of economic bad news and a regional arms build-up are sure to put this at risk.
Why do people always have to panic when population or economic growth falters or heaven forbid goes negative. Surely the rest of the planet rejoices.
Yes, they could turn over the unoccupied cities to Bangladeshi or Pacific Islander refugees. Caused by burning fossil fuels.
Precisely. Population growth is a major threat to the future of our planet.
Population certainly needs to decline globally, however the precipitous decline that China looks to be heading for (around 700 million by 2100) will have serious consequences for their economy and society. Many Chinese people now have not only no siblings but no cousins either. A lot of old people with many fewer younger and working age people will create enormous problems for them.
Yes. Another aspect of the demographic crisis there is the bias for male children. By whatever means parents have succeeded in producing a generation with many more boys than girls, which results in a variety of serious social problems.
So: yes, it’s true as others have posted that population growth is doing enormous damage and many of the intractable problems we face would be easier to tackle with fewer people. But, if as a consequence of a falling population the demographic balance of the population shifts substantially, that creates another set of problems. I’m not aware of an acceptable method of reducing a population reasonably quickly that causes all demographic sectors to shrink at an equal rate, though some pandemic diseases might come close if there is no immunity or protection at all.
‘I’m not aware of an acceptable method of reducing a population reasonably quickly that causes all demographic sectors to shrink at an equal rate’
Those who complain about population growth never divulge what their ‘solution’ is…..
The belief in politics the world over is that we need more babies to grow up and look after our aging population. When the wrinklies to babies ratio is off-balance, God becomes displeased, and sends a plague of recessions and inflations to punish us. Any politician stating otherwise is hauled off to the Newscorpse torture chambers.
Basic maths question, where are fertility rates rising as opposed to falling? Except for Israel, Georgia etc. populations are stagnating, before inevitable falling, but why the rush by mostly older people to demand an end to ‘growth’ or ‘limits to growth’ when populations will fall naturally?
Anglo population obsessions have more to do with the 19thC eugenics movement of Malthus and Galton, then 20thC Hitler’s mate Madison Grant and post WWII from ’70s fossil fueled ZPG Zero Population Growth of ‘Tanton Network’; the latter under various guises is still accessing media…..
China and elsewhere have unbalanced population pyramids lacking: replacement fertility rates, broad cohort of youth and working age to support increasing numbers of retirees.
It’s all very well to focus on now, but avoids serious issues for younger generations expected to support retirees’ pensions and health care via taxes in future.
It is not true to say that factory production has moved out of China because there is a growing shortage of young workers. In fact, China has an almost unlimited supply of willing workers in the hinterland back from the affluent east coast. Rather, labour-intensive production has moved to Indonesia, Vietnam and India because labour is cheaper outside of China. That is a success story, not a failing.
We are horrified by the idea of a shrinking population, because we are still biased by a traditional sentiment – that every fecund woman should be pregnant and kept pregnant until she drops dead in childbirth. Every male must marry, serve his family and ensure that his wife stays pregnant to that end. – To the greater glory of God, Industry and Empire, we should be producing labour for the fields, labour for the factories, cannon fodder for the army and souls so the Church can outpopulate its competition.
The economy can still expand while the population decreases. If we have too few workers paying income tax to support the wrinklies, then we should be taxing industry instead.
“We are horrified by…..” have you got a reference for this, preferably one from less than a century ago?
No economy can keep growing at 10% per annum. It is impossible, as anyone who understands exponential growth realises. As for the slowdown, growth between 2-3% is not what China should expect just yet, although that will be likely down the track. The economic disruption the lockdowns required for zero Covid, when Covid is the Omicron variant, followed by the disruption following no lockdowns, when millions get sick, is likely to produce growth of 2-3%, so China should not be alarmed by that. As for population decline, that too should be welcomed, since it is impossible for population to keep growing in a finite liveable space.
The move of western investment from China to Vietnam and other countries should be expected too, partly due to political pressure from the US for investment to crimp China’s growth and partly due to Xi Jinping’s policy of raising lower wages in China, which will encourage foreign investors to look elsewhere for lower wages.
I also think we can also be grateful for the disappearance of China’s former “wolf warrior” diplomacy, which perversely revealed China as still not over its one hundred years of humiliation, since its diplomatic confrontations with other countries reflected the previous resentful silence with which they once had to accept the terms of engagement laid down by other countries.
China, like the Republic of China in Taiwan, still makes excessive claims of control over surrounding seas and especially the South China Sea. We can only hope that nostalgia for the dominance that the feudal Ching Dynasty once had over surrounding countries faded with the realisation that technology rather than territory is the key to modern forms of prosperity.
Wolf Warrior Diplomacy” is actually a fabrication of western politicians and amplified by western MSM. It was never as bellicose as reported.
Exactly.
3% growth and a falling population sounds fine to me. Half their luck. As for a growing influence in PNG, forget it. Even PNG has no influence in PNG.
Gosh. Not just a rising cost of living, but living costs too. But yes, I can see how those factors might deter people from having more children. On the other hand, how on earth does a lack of education drive the population down? Are they so uneducated they cannot work out how to procreate? In most countries the size of families falls with increased education, so how has China turned that on its head? The link between not having children and not being able to change jobs is not too clear, either.
One factor that is ignored, yet cited in credible demographic research globally, is not women choosing to have (fewer or more) children, but significant rising trend of women choosing not to have children.
Further, I cannot recall the name (Zubryn?), he alleged that China’s one child policy was informed by west coast US population types, but should have gone for two child policy, leaving a modest fertility rate below replacement, then less impact….