It is important to pray for China’s economy. It is the second biggest economy in the world, with some experts saying it is actually the most influential and will become the biggest, the number one in the world. The direction China goes economically will impact most nations to a greater or lesser extent. “The Chinese economy is today twice as big on the global stage as it was in 2007 before the global financial crisis.” It may not be totally true that “if China sneezes the world catches a cold”, but it may soon be.
The Third Plenum of the Chinese Communist Party, the meeting that sets China’s economic policy for the next few years, was held in July. The 1978 Third Plenum “finished with a keynote speech by Deng Xiaoping. Deng called for China to open itself to foreign capitalists and overseas manufacturing firms. Deng’s new ‘reform and opening up’ policy drove decades of Chinese economic growth, lifting the masses from poverty and integrating the People’s Republic with the global economy.” Thus the 2024 Third Plenum was keenly watched to see what new economic policies would emerge.
“Eternal optimists had hoped for a change of course at July’s Third Plenum, an event held every five years that has set economic strategy ever since Deng Xiaoping embraced capitalist roadsters at the third plenum of 1978. Instead, they got another kick in the stomach.”
Economic experts outside of China were disappointed. “There’s nothing new under the sun: the same industrial policies, the same ideas” (Alicia Garcia-Herrero of Natixis). “No consumer-led growth, no mention of market forces, nothing.” President Xi Jinping has embraced policies that are very different from those of Deng Xiaoping, the policies that “drove decades of Chinese economic growth.” “The third plenum lays the matter bare. Xi clearly has no intention of changing course.”
The argument is that China's leadership urgently needed to bring in innovative policies that will encourage internal economic growth in the lives of Chinese citizens. It did not. China's leadership doubled down on policies that drive massive Chinese exports to other countries but do not increase the wealth of the average Chinese citizen. “We now have an untenable situation where China produces 31% of the world’s manufactured goods but accounts for just 13% of world consumption” (Professor Michael Pettis of Peking University). China is exporting much, much more than it is importing. “China’s trade surplus rose to a record US$100bn a month.”
“The communique 17 times exhorts the Chinese people to ‘persist’. This means ‘persisting’ with policies that divert a big chunk of the national pie towards state bodies and companies, which thus enhances the control of the Communist party.” The Chinese middle class “borrowed to the hilt to get on the property ladder but are now caught in the double vice of falling incomes and falling home prices.”
Internationally, the policies signal conflict with the West. The massive trade gap “was previously tolerated. It will not be tolerated now.” Chinese people need to be buying imported overseas goods “but they save a third of their income.” “Nothing is offered to stimulate sputtering domestic demand and narrow China’s gaping trade surpluses. It will generate more trade conflict.” “Chinese companies are having to flog their wares on the global market at cut-throat prices to stay alive.”
Prayer Points:
- Pray for China’s economic policymakers, that new voices would be heard.
- Pray for those in China who face wage cuts but at the same time face rising prices.
- Pray for wisdom and moderation in the reaction of Western and other political leaders to the decisions of the 2024 Third Plenum.
Source: China’s third plenum is almost a declaration of economic war (Ambrose Evans-Pritchard, The Telegraph)
