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Aug 28, 2021
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China slows down its economy to survive

© AFP 2021 / Wang Zhao

If anyone thinks that the United States is so upset by the Afghan disaster that they have forgotten about containing China, it is in vain. On the contrary, the dominant geopolitical idea (at least in political circles) there looks like this: we failed in Afghanistan, we cannot allow China to somehow use this failure.

Let’s look at a rather typical comment from the Republican flank in this regard: what if China, right now, while we are in chaos, attacks Taiwan? No, this is unlikely – such operations take a long time to prepare. But what if he invades Afghanistan itself? But he does not really need this, because the main sponsor of the Taliban * movement is Pakistan, and for Pakistan, the support of China is most important in this world, so it is enough, if necessary, to just call from Beijing to Islamabad. Okay, but then what will China do? Nothing, it is enough for him to sit still – and not interfere with the rest of the world enjoying the picture of American flight.

The last conclusion is quite accurate and obvious, but what is it that not an imaginary, but a real China is doing now, perfectly seeing the unexpected misfortune of its “restraint”? The answer is this: he walks in soft slippers so that no one can hear, through the labyrinths of the world economy, he tries to use the current situation to strengthen his, primarily economic, positions – both at home and in the world.

It is the Americans, perhaps, who ascribe to China and to anyone else the desires that in such a situation would arise from the United States. But Beijing tends to see things differently.

The starting point for decision-making is known to everyone: in 2020, China was the first to emerge from lockdowns and other measures killing the economy. It was the first to start rebuilding the economy and was the only major power with positive growth. Therefore, his task for today is not to frighten off happiness or not to let others scare him away.

As a result, Beijing is systematically … slowing down economic growth. The fact is that in the first half of the year this figure was 12.7 percent. And this is not just a world sensation, but also a frightening figure. It is not only China’s global competitors that are alarming – everything is clear with them. But it is much worse for the authorities of the country itself, because overheating of the economy is a very dangerous thing.

It can cause, in addition to overstraining the infrastructure (suddenly, like dominoes, power grids fall), a cascade of debts in industries where people are now happily making quick money. And this is primarily real estate and new construction, as well as banks and other finance.

It is not the first year that China has been cleaning banks, but a variety of measures have now been taken with regard to real estate, including restrictions on the collection of capital for the next megaprojects. Because this is where the risk of bankruptcy is greatest. This policy is accompanied by propaganda statements like “houses are being built in order to live there, and not for speculation,” but on the whole the essence of what is happening is clear.

The authorities also closely monitor the behavior of local authorities: they are also borrowers, and then the budgets of entire provinces are under threat. Restrained steel production and much more.

But there are areas where restrictions, on the contrary, are lifted and lifted. These are, first of all, direct (that is, in production and other enterprises) foreign investments. Last year was such that all investment in the world fell by 40 percent, but in China, it grew by 4.5 percent. And the investments already made, contrary to global trends, were profitable. For the companies of the country that is holding back China – the United States – only 56 percent of investments were profitable, but for the Japanese, for example, all 86 percent.

Beijing is now introducing new indulgences in this area – again reducing the list of industries where foreigners are not expected. And improves the overall business climate. But in this area, too, he draws a clear line: something that does not belong to the category of quick speculations that threatens overheating is encouraged.

The wording of the current – relatively new – economic policy in China looks like this: risk prevention and stabilization, encouragement of enterprises capable of generating long-term growth, rather than leaps and bounds. But it will especially support small and medium-sized enterprises that bring progress in new technologies or new energy, and those that will provide stable employment, in particular in the provinces. The rest – and especially the shadow financial sector, which is trying to ride provincial business and local governments – will be constrained and pressured by regulations.

It may seem that this is a purely domestic policy, in no way related to what is happening outside of China. But this is absolutely not the case. Quite the opposite: the country’s authorities are putting things in order in the fortress, which will not even necessarily be attacked from outside. Rather, in this fortress they are afraid of disasters beyond its borders, which will then somehow spill over the walls.

And above all, we are talking about the United States. Let’s look at the analytical material that reports that the administration of President Biden, undermined by the Afghan shame, has decided to tighten the screws, doubling its efforts to “covidize the economy.” Namely – that they now have a pandemic forever (along with measures supposedly to combat it). This “mobilization regime” presupposes, among other things, an endless waterfall of empty money distributed in the form of compensation. But such money does not only threaten “financial Afghanistan”, and a very fast one. They also undermine the economy from an unexpected angle. Compatriots living in Manhattan, that is, once in an almost prosperous part of the world, a showcase of prosperity, say: throughout the empty city there are thousands of jobs, announcements and appeals, but no one goes there, because sitting at home you will get more. And the city is slowly falling apart and slowing down, in addition, the police have disappeared from the streets, but the gangs have disappeared.

To the outside world, this situation threatens, first of all, with the collapse of finances, but also with chaos in terms of orders and supplies. So China, if it wants to maintain last year’s economic victory over a global competitor, is simply forced to build a healthy and self-sufficient economic system, in which, however, there may be a place for foreign business, including the one that will run from the United States.

* Terrorist organization banned in Russia.

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