This weekend is the ending of the once-every-five-years party congress. the highlight: Xi is now totally in charge, 3 of the 7 members of the polite bureau are gone as is China's #2. As far as Xi is concerned that's the positive side of the balance sheet.
The negative:
Taiwan
China still wants to re-integrate Taiwan into the country. The Taiwanese are less than keen, in addition, so many anti-market actions have been taken in China that Taiwan which is an example of extreme corporatist capitalism is not amused. Many believe that the Ukraine war will dissuade the Chinese. Personally, I think they are wrong. China's army is well equipped and far larger than Russia's, and China has a small window of opportunity, like after the US midterm as it looks like Biden will lose both Senat and the House, his second term will be a fight for survival, to invade Taiwan. This may also address internal Chinese security issues.
Property
Real Estate accounts for 70% of all wealth in China and 24% of GDP, and the sector is in trouble. The Chinese leadership is fully aware of the problem, and like many others has delayed dealing with the problem. There are no easy solutions left now only hard options. The shutting down of the economy in many cities to reduce the incidence of Covid has had a massive and continuing impact. Middle-class investors are starting to rebel especially since the builders are behind schedule (on average 18 months) and are out of resources. Finally, the amounts are huge and possibly beyond the ability of the government to fix.
Demography:
Is a massive timebomb, not only is childbirth, at 1.2% (it fell to 0.9% during Covid) below population replacement but there is also a massive imbalance between men and women. In the 19 to 35 age group there is 1.3 man for every woman. That means that up to 30% of all men will not find a mate. Some analyses seem to indicate that by 2050 China's population could be 60 million smaller, but more importantly, its working population would decline by more than 200 million.
Imports
20% of all energy is imported into China (oil from the middle east), and China is the largest food importer in the world. China is the largest importer of semi-conductor advanced tools.
Over the next five years, Xi has many opportunities, but fundamentally he is a politician who cares little for the economy (re: shut down of the economy repeatedly during Covid). The country faces many serious challenges and has several short-term opportunities, to strengthen its long-term position at the expense of the United States which are about to enter into a domestic-centric policy decade.
The Chinese have modernized their army and are in the process of building a true blue-water Navy that can project forces outside its territorial waters. Economic and demographic forces may force Xi's hand to move more quickly than it wants over Taiwan, the window there is short, and other domestic issues could otherwise take over the government's actions.
Xi will certainly want to project his power throughout the East China Sea and maybe even as far as Japan, which still doesn't have nuclear weapons. The recent comment about the 5th fleet seems to indicate that America will soon have to retire several elements of the fifth fleet because the vessels are getting too old. Luck and opportunity for Xi!
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