Why a more inward-looking China is bad news for the world economy
The increased role of geopolitics and ideology in Beijing’s economic decision-making is bad news not just for China but for the world.
President Xi Jinping, August 2022:
We should adhere to self-reliance, put the development of the country and nation on the basis of our own strength, and firmly seize the initiative in development. To build a great modern socialist country in an all-round way and achieve the second Centenary Goal, we must take the road of independent innovation.
This quote by President Xi clearly outlines the inward tilt of Chinese economic policymaking that is now becoming increasingly obvious to the rest of the world. But it actually has deep roots. Ever since the 2008 global financial crisis, when the West’s reliability as a trading partner was thrown into question, self-reliance has become a more decisive organizing principle for Chinese officials.
As a result, the export-dependent growth model on which China built its economic rise in recent decades has been fraying. Exports as a share of China’s GDP peaked at 35 per cent in 2007 but had fallen to around 20 per cent by last year, a level not seen since before China’s accession to the WTO in 2001. This shows that net exports no longer make any meaningful contribution to Chinese GDP growth.
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