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What does China need

The year 2021 marked the end of the war for the ruling Communist Party in China, after it announced the success of the first hundred-year plans to eradicate poverty, and besides being the largest trading country in the world, China is now the largest recipient of foreign direct investment.

China’s per capita GDP has reached nearly $10,500 and the middle class now has a population of about 400 million, the South China Morning Post reports.

President Xi Jinping also announced his ambitious drive to double the size of the economy again between 2020 and 2035, and adopted a tough stance on the engines of China’s modern economic growth, the digital economy and the real estate industry.

In conjunction with the diplomatic confrontations with the West, China revealed a deep weakness in its economic structure, as it became clear that it lost the privilege of surplus and cheap labor.

The fertility rate in the country is now the lowest in 43 years since the start of the one-child policy, with one national newspaper describing having three children as “the moral obligation of Communist Party members”.

Distinguished but troubled model

China’s capital-intensive growth model has caused an over-reliance on the huge real estate industry as real estate has come to mean employment, banking profits and the financial lifeblood of local governments.

But when the economy is in turmoil, pain is born in individuals, governments and various commercial sectors, and it spreads from banks, construction and commodities to the real estate itself.

In 2021, Beijing asked its most successful companies — including Alibaba, Tencent and Bindudu — to make donations to the China Campaign for Shared Prosperity.

As companies have pledged hundreds of millions of dollars against future profit budgets, other regions of the world, such as the US stock market, will bear the lion’s share of wealth redistribution to fund the goals of real growth engines.

Among the “three horses” of the Chinese economy are trade, investment, and consumption—and yet China’s new economic philosophy has been firmly centered on its prosperity.

But despite that, trade contributed 19.5% to China’s GDP growth in the first ten months of 2021, as China acted as a global manufacturer, meeting demand in the face of supply shortages.

Amid its excellent trade performance, the recovery of consumption in China has been slow, with total consumption remaining almost flat over the past two years.

China’s structural economic transformation will present a challenge, but government interference in the private market could prove fatal, according to the report by Professor Shirley Zyu, a political economist and practice fellow at the Ash Center at Harvard Kennedy School.

In July, China launched an investigation into Didi, the leading passenger transport company, two days after it floated its shares in the United States, and the company’s exit from the New York Stock Exchange may mark the beginning of the end of the listing of Chinese technology companies in America, due to Beijing’s data security concerns.

Meanwhile, the US has grown impatient with keeping publicly listed Chinese companies secret, and so companies are caught between the two economic giants.

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