Dr Ashwani Mahajan
Until recently, majority of economists and policy analysts around the world used to argue that the world needs to learn from China. Understanding, how China has made itself the second largest economy of the world after America, in the last two-three decades, there is a need for developing countries to move forward learning from China. In India too, many economists were seen offering similar advice. Those economists were obsessed by the industrial and infrastructure growth in China. But for some time now, the news of industrial decline and other crises in China has started shaking the world. Now many people have started questioning the development model of China itself.It has become imperative for the world to study the changes taking place in China in the last few years and especially after COVID-19 breakout. Countries of the world should understand the reality of China and reset their attitude towards it and also choose the right path for their development.
China growth paradigm
There have been many reports of industrial decline in China in the recent past. There was a time when China’s industrial sector was growing at the rate of 30 percent to 40 percent. Industrial units were being established on an unbelievable scale, and their enormous production was being aggressively pumped into the markets, world over. For that, the goods were being cheapened with the financial supportof the Chinese Government. Adopting all kinds of unethical, unfair and illegal tactics including ‘under invoicing’, ‘dumping’ and ‘bribery’, China had been increasingly occupying markets world over. Ignoring all these actions, policy makers around the world were not only not counteracting this invasion by China, but were giving credit of the same to the industrial efficiency in China. They were even arguing that consumers were getting cheaper goods through cheap imports from China.
On the other hand, the other benchmark of China’s development was its infrastructure construction. China’s unprecedented progress in infrastructure, including railways, ports, roads, airports, bridges, power stations, industrial research and development centres, had blinded the world. Not only this, in almost all the countries of the world, Chinese companies were engaged in infrastructure building and riding on the financial help from the Chinese Government, in the name of cooperation in infrastructure construction, they were interfering severely in the policies of the governments there.China’s foreign exchange reserves were booming due to a growing surplus in the trade balance due to China’s ever-increasing finished goods exports and extremely limited imports (especially raw materials and intermediates). Banking on growing foreign exchange reserves, the Chinese government was not only acquiring land in many countries including Africa, but even companies in European, American and Asian countries in large number.
Due to the increasing economic, political and strategic clout of China and without any significant retribution, the countries of the world were caving under pressure from China. China was able to easily implement the ‘Belt Road Projects’ all over the globe.
Although there was some opposition from the local people due to Chinese dominance in many countries, but due to corruption ridden governments of those countries and fear of China, it was increasing its presence all over the globe.
China in serious trouble
No one could have imagined that China, which was getting established as a superpower in the world, could ever face an economic crisis. But there are indications that China’s seems to be caught in a serious crisis.There have been reports for some time that due to power cuts in China due coal shortages, many factories are either closed or are running under capacity. This problem is there in at least 20 provinces. Due to this crisis, agencies like Goldman Sach and Nomura have significantly reduced China’s growth forecast. This crisis is being said to be a bigger crisis than real estate.
It is worth noting that China’s second largest real estate company Evergrande is under more than $300 billion debt. People’s faith has taken a deep dip not only in China’s property market, but also in the financial system of China, as people have lost their hard-earned savings. Recently, the pictures in television, of many unfinished skyscrapers getting demolished, have shocked the world. These buildings have been demolished by the Communist rulers of China so that the bubble of the real estate market does not burst soon, due to huge real estate inventories.
On the other hand, China’s game-plan was that it would now trap the countries of the world into its aggressive infrastructure project. For that, it started the ‘Belt Road Plan’ with pomp and included more than sixty-five countries in the same. But due to its nefarious intentions, today it has become notorious all over the world, because in the name of infrastructure development, it has started grabbing their projects of strategic importance, after trapping them into unserviceable debt trap. Sri Lanka’s Hambantota port became a living example of its ill intentions.
Today the world is fast realising that China is at the root of the health and economic crisis, the world has gone through due to the pandemic. The way China has attempted to exploit the world by profiteering from the Belt Road project first; and later the pandemic, it can never be a trustworthy country. The world is also realizing that under the guise of globalization, increased dependence on China for industrial goods, has destroyed their economies in general and industry in particular, and due to this, poverty and unemployment have also increased. Countries around the world including India, America, Europe are seen taking steps towards self-reliance. Due to the hostility of China, efforts have been started by various countries to reduce imports from China, which is bound to affect Chinese industrial production. Chinese infrastructure companies are in trouble due to the cancellation of many Belt Road agreements. China’s financial institutions are also getting into trouble and people’s financial savings are fast sinking.
On the other hand, China was first trying to intimidate many countries including India by showing its strategic power in the sea. In view of this, military exercises under the auspices of the ‘Quad’ group consisting of India, Australia, America and Japan have started challenging China.India came out of the ‘RCEP’ agreement in November 2019 that has been going on for the last almost a decade and has scuttled the plans of China’s expansionist trade. The rulers of crisis ridden China in crisis are trying to deceive the world by giving a bold posturing. However, it has to be understood that this is also a big opportunity for all the countries of the world including India to accelerate industrial progress in their respective countries, overcoming lure from substandard Chinese goods; and move on the path of self-reliance. No contracts should be given to Chinese companies. The countries which have signed the Belt Road initiative, should come out of this project and free their countries from the Chinese designs of debt trap.
(The author is Professor, PGDAV College, University of Delhi)
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