After the end of World War II, the United States spent trillions of dollars containing the Soviet Union. But after the Cold War, it was discovered that the United States had overestimated the power of its 40-year nemesis. It turned out that the USSR’s economy was only about half the size that the CIA and other agencies had said that it was.
Could that be the case with China as well?
The answer is: absolutely.
The Measuring Method Matters
No one has accurate financial numbers regarding China’s economic output, least of all the Chinese Communist Party (CCP). If we simply took the CCP at its word, China’s economy is at parity with that of the United States. That’s exactly what the CCP wants and actually needs its citizens to believe.
But the CCP has every incentive to lie. After all, its claim to legitimacy is directly linked to economic prosperity. Without that, all political legitimacy is in jeopardy. That explains China’s oppressive and Orwellian social-credit system and other aspects of China’s very sophisticated and brutal surveillance state.
Western estimates are really just guesses as well. For instance, if we look at concrete production and construction statistics, it would appear that China’s economy surely must be the largest in the world. However, it makes concrete that exceeds all other global production combined and builds cities in which no one lives and other useless projects. In other words, China routinely conflates useless activity such as unnecessary building projects, the overproduction of goods and refinancing bad loans as economic productivity.
Growing Reliance on Foreign Resources
Without the price mechanism to determine the market value of goods and services, the value of things in a command economy becomes arbitrary. Such an economy based on political favoritism instead of market forces becomes distorted, inefficient and ultimately unsustainable. With its contracting consumer economy, a massive debt-to-GDP ratio and growing food supply problems from loss of arable land, African swine fever epidemic and with the armyworm threatening its crops, China faces growing dependence on foreign natural resources as well as for food.
China’s Enigmatic OBOR
That’s why China’s One Belt, One Road (OBOR, also known as Belt and Road) initiative is so enigmatic. It’s one of the broadest, most sweeping international economic development plans in history. Certainly, it indicates China’s growing economic power.
But it may actually be quite the opposite. China’s economy has the appearance of a wealthy capitalist country with its formidable transformation, including a middle class and technological acumen. But a closer look reveals some very critical contradictions.
For example, where is the capital in this “capitalist” society? And where is the power growing and where is it diminishing?
Today, the CCP is more wealthy and powerful than ever before. At the same time, the engine that normally drives growth and wealth in society—the middle class—is weakening. Reports of stalled demand, a failing stock market, and rising discontent among the middle class are growing. China’ growing surveillance and prison state confirms that narrative, as does the fact that the middle class is investing their money outside of China. What’s more, college students selling their belongings, including their smartphones and computers to pay expenses, are becoming common.
Sustaining the CCP Is Top Priority
The truth is, China’s economic strength not only is less than what most estimates say it is, but it is much worse. According to night time electricity usage analysis, China’s GDP is inflated by 30 percent or more in various cities and regions. That shouldn’t be happening in the world’s most dynamic economy.
That dynamism exists at the lower levels of the economy until the CCP steps in to steal the value. Once the state takes ownership of a profitable enterprise, the value is sucked out of it via ever-larger loans by state-owned banks, enriching the new CCP owners as it destroys the indebted enterprise. This is how China finds itself burdened by an unsustainable 3:1 debt-to-GDP ratio.
By this process, the CCP has exhausted China’s natural resources and destroyed its capital base. That’s why the actual purpose of the OBOR is not so much to develop foreign markets as it is to sustain the CCP’s economic model of “cannibal capitalism.” The OBOR gives China penetration into these new regions to acquire the markets and resources it desperately needs, with the lion’s share of the benefits going to China.
Huawei to Deliver Technology Secrets?
However, the broader plan goes beyond those two very important missions. In order to dominate the West technologically, it must have ongoing access to high-level technology and manufacturing techniques. Since 1980, it has acquired both by theft and forced transfers. The plan going forward is to use the access to all transmitted data that the Huawei, ZTE and other telecommunications equipment provides to simply steal technological secrets.
Huawei is the key to China’s Made In China 2025 plan. With equipment in place throughout much of the world, including the United States and Europe, China will reap billions in ongoing business servicing and updating equipment for the global 5G rollout that is already underway. Huawei and other China communications providers will also deliver millions of data streams from many of the most technologically advanced companies and government programs around the world to China.
Europe Now Wary of Huawei
But that plan is now in jeopardy as the European Union questions the wisdom of using Huawei and other China telecom providers. A nonbinding resolution sponsored by Reinhard Butikofer (a member of the EU Parliament’s China delegation) in March 2019 calls for multiple equipment vendors, a phased rollout of 5G technology and adherence to strict cyber defense protocols. A ban on Huawei equipment isn’t part of the resolution, but it hasn’t been ruled out, either.
From an economic as well as a security perspective, the EU cannot afford to allow continued technology and market transfers to China. The prospect of losing the UK economy to Brexit and continued economic slowing in Italy and France make the EU very nervous about losing more economic advantages. Given China’s economic nationalism, protecting technology and markets is now a top-tier priority for EU policymakers.
Inevitable Crash Coming Sooner than Later
The overwhelming causes of China’s economic troubles stem from the CCP’s destructive policies, which are primarily about keeping the CCP in power and destroying the economies of the West. Importantly, China’s stormy economic conditions are not due to Trump’s tariffs—they have not yet come into full force, though they do provide a convenient excuse for Chinese leader Xi Jinping.
Still, the CCP’s biggest fear–other than their own citizens—is Trump’s leadership in putting tariffs on Chinese goods. An EU tariff plan may well be coming next. Either or both will put additional pressure on the Chinese leadership to deliver on their promise of prosperity to the Chinese people. The CPP is finding it difficult to deliver on that promise and that will likely continue.
As economic hardship and civil unrest grow in China, the CCP will continue to crack down on its citizenry. The unexpected rise of Trump and the expanding trade war against China may well mean that the CCP will face a day of reckoning sooner than later.
James Gorrie is a writer based in Texas. He is the author of “The China Crisis.”
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.