Imphal Review of Arts and Politics

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What does China's economic downturn mean for its trade relations, its diplomatic leverage and its overseas development

China’s Changing Fortunes: Are its Glory Days Numbered or is it Reinventing Itself

By Lachlan Guselli


Rumours of China’s demise come and go, but how it responds to the current crisis will have far-ranging consequences.

Something is happening in China’s economy.

Domestically, the flailing real estate market, the eye-watering debt burden weighing on local governments, and 30 years of record low foreign investment levels have seen major organisations ‘de-risking’ Chinese operations. Manufacturing giants Dell and Foxconn are among the companies that have diversified their operations, moving production to Mexico, India, Vietnam and elsewhere to reduce their exposure in China.

Since its economy took off under Deng Xiaoping’s leadership in the late 1970s, China has responded to economic downturns by harnessing the manufacturing behemoth to export the country’s way out of trouble.

The global economy in 2024 is very different, but the tactic remains the same. Speaking with Bloomberg, France’s Finance Minister Bruno Le Maire said that China flooding the market, driving down demand and prices, is “a threat not only for the EU, not only for the US, but for the global world economy”. The economic shock has led some observers to declare that the country, with a shrinking population and a deflating economy, has reached the summit of its power and influence.

On the other hand, what if China’s economic machine is not plummeting but instead — as capitalism did in the 1950s and 60s and in the 1980s in the US – is reshaping itself to a new set of industrial and economic conditions?

Chinese investment in African nations and minerals resources on the continent has not slowed; in fact, it is accelerating. The enormous Belt and Road Initiative investments continue across the Global South, with increasing focus on green development, while China finds new markets for its electronic vehicles away from the US, with its increasingly protectionist approach to trade with China, and potentially the EU if expected tariff hikes on EVs are announced in early June.

With China still the top trading partner of more than 120 countries, a trade war would have far-ranging effects. Even if China gets itself back on track, others may want to have more say in any future relationship.

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