Th future of China’s economic power will depend less on when the country’s GDP passes that of the United States and more on the progress that Chinese firms make in manufacturing and selling capital goods and high technology. Foreign multinationals still dominate China’s home market in advanced capital goods, and China remains broadly dependent on Western technology. In the areas that will matter most in the twenty-first century, Chinese companies have a long way to go, which should give pause to anyone confidently predicting a not-too-distant era of Chinese economic dominance.
The People’s Bank of China has been selling off foreign currency reserves at a prodigious rate to keep the RMB stable. At $3.2 trillion, China’s reserves still seem enormous. But they are down $760 billion from their 2014 peak, and $300 billion in just the past three months. As shown in the figure above, at the current pace of decline China’s reserves will, according to the IMF’s framework for reserve adequacy, actually fall to a dangerously low level in the spring. This means that China would be at risk of a balance-of-payments crisis, unable to pay for essential imports or service its dollar debt payments.
Longer term, China looks less likely to commit its reserves to big projects that build up its image abroad, said Victor Shih, a specialist in Chinese finance at the University of California, San Diego. “When you’re losing $100 billion a month, you can’t afford to invest in a highway in the middle of nowhere or a railway in Pakistan that could be blown up,” he said.
China’s industrial overcapacity is “sucking the oxygen out” of its economy, fueling a dangerous buildup in bad loans and now exacerbating trade tensions with the West. Yet although the Communist Party has been aware of the problem for years, it has failed to tackle it.Those are the findings of a new report by the European Chamber of Commerce in China that blames complacency, a lack of leadership and protectionism by local governments for China’s failure to address the problem.“We have heard the same soundtrack for years — ‘We are aware of the problem, we are going to deal with this,’ ” said Chamber president Jörg Wuttke. “But the problem is getting worse. Now we are asking: Do you have the audacity to implement your policies?”China’s state-owned heavy industry expanded too far and too fast during the boom years, in a borrowing and investment splurge. Now, as the economy slows, there is too much industrial capacity chasing too little demand. Many plants have been forced to cut back output and are struggling to pay back loans, but, instead of closing down, these “zombie” factories are being kept alive, at a huge cost to the economy and the banking system.
“All news media run by the party must work to speak for the party’s will and its propositions, and protect the party’s authority and unity,” Mr. Xi told the gathered media officials on Friday, according to Xinhua, the state news agency.Mr. Xi also wants to curb the presence of foreign media companies. Last week, government agencies announced a regulation that would prevent foreign companies from publishing and distributing content online in China. That could affect Microsoft, Apple and Amazon, among others.Mr. Xi’s appearances on Friday were another major effort in his campaign to build a personality cult that equates him with the well-being of the party and the nation. The act of biao tai, or pledging loyalty, by newsroom leaders was one that Mr. Xi has demanded of military leaders and other important figures in the last year.
It is necessary for the media to restore people’s trust in the Party, especially as the economy has entered a new normal and suggestions that it is declining and dragging down the global economy have emerged.That’s why Xi has made the inspection and hosted the conference. The nation’s media outlets are essential to political stability and the leadership cannot afford to wait for them to catch up with the times.