Global tensions rise as China's economic policies are feared to destabilize international markets.
There has been mounting global concern regarding China's economic policies and their impact on the world economy. A consensus is forming among various governments that China's actions pose a significant threat to the economic stability.
Despite assertions of economic strength and resilience by several governments, China's industrial practices are perceived as a potential threat to the global economic balance. While a strong economy should theoretically be able to withstand or even benefit from increased competition and lower prices resulting from China's surplus production, the reality suggests a more delicate equilibrium.
Governments worldwide are preparing to attribute potential economic downturns to China's economic strategies. They argue that China's utilization of artificial means to support its manufacturing sector is unfair and disruptive to international trade.
The U.S. Treasury Secretary, Janet Yellen, has recently emphasized the robustness of the U.S. economy, citing strong GDP growth, a healthy labor market, and a significant reduction in inflation from its peak. She has also acknowledged the "uneven" nature of recovery across different countries and the presence of risks to the global economic outlook.
The G7's agenda includes discussions on financial stability, macroeconomic policies, and the prevention of geopolitical conflicts affecting economic growth. A primary concern is China's industrial overcapacity, which has led to an oversupply in the global market and depressed prices, further exacerbating macroeconomic imbalances.
China has attempted to stimulate domestic demand through various measures, but these efforts have not yielded the desired results, indicating deeper systemic issues. The focus on the supply side fails to address the lack of external demand and the internal challenges within China's economy.
In response to these economic challenges, the Biden administration has imposed tariffs and sought to present a united front against China's industrial policy. This stance represents a shift from previous positions that tariffs are essentially taxes on consumers.
Trade statistics from Japan, a key indicator of global economic health, suggest a persistent contraction in global trade, contradicting claims of a robust recovery. Exports have not kept pace with expectations, and import volumes remain low, reflecting weak demand.
The weakening of the Chinese yuan (CNY) is seen as a sign of increasing economic desperation and systemic risks. Efforts by Chinese authorities to prevent further devaluation of the currency indicate that the weakening is not a deliberate measure to boost exports but rather a response to market pressures.
The international community's focus on China's economic policies signals growing anxiety about the true state of the global economy. Despite public declarations of strength and recovery, the underlying data and market responses reveal a landscape of weak demand, systemic challenges, and a lack of robust growth. The situation with China's overcapacity and the devaluation of the yuan is symptomatic of these deeper issues, which have roots extending back to the financial crisis of 2008 and beyond.
