China-US rivalry will continue to loom over global politics
China-US rivalry dominated international politics this year and will continue to loom large in 2024. The Chinese economy
— the locomotive driving global growth for the past three decades — has been sputtering, unable to restart after Beijing finally abandoned Covid-19 lockdowns in December 2022.
Political economists are now debating “who killed the Chinese economy?”. Adam Posen of the Washingtonbased Peterson Institute for International Economics points to the substantial decline of China’s durable goods consumption and private-sector investment as indicators that Chinese people are prioritising short-term liquidity over long-term investment. The cause of this, Posen argues, is increasing intervention by the Chinese government in the economy, raising uncertainty.
Posen argues that Beijing’s state-centric economic policy of prioritising state-owned companies to drive economic growth at the expense of the private sector is doomed to fail. Consistent with his liberal position, he urges Washington to reduce sanctions on China and welcome Chinese private investments looking for better returns abroad.
Responding to Posen’s diagnosis, Zongyuan Zoe Liu of New York’s Council on Foreign Relations argues that he is too fixated on the role of zero-Covid lockdown and its effect on the confidence of the Chinese people. She argues that the Chinese economy’s problem is structural.
The Chinese economic miracle was achieved through government prioritising investment and exports over domestic consumption, “leading to harmful stagnation on the demand side of the economy”. President Xi Jinping’s sins, as it were, were to continue with this policy of state-led investments when he ought to have been more pragmatic, changed course and focused on stimulating domestic consumption.
While academic debate over who killed China’s economy is itself fascinating, there are serious real-world implications for citizens. Given China’s economic quagmire, Posen suggests Washington should let Beijing flounder and take whatever advantage it can.
Liu says the US, with the EU, should work together to prevent a Chinese economic crisis, as this would be a disaster for the US and the EU.
Closer to home, how does China’s economic slowdown affect us in Africa? The IMF believes a single percentage point decline in China’s growth rate could reduce Sub-Saharan Africa’s regional growth by about 0.25%. For oil exporters such as Angola and Nigeria the loss would be closer to 0.5%. China’s economic slowdown has already translated in a decline in bilateral lending for infrastructure projects in Africa. IMF data shows Chinese lending to Africa peaked in 2016 and has been falling steeply since.
Overall, China’s share of Africa’s debt now stands at 6%, mostly owed by Angola, Cameroon, Kenya, Nigeria and Zambia.
Looking forward to 2024, the greatest political uncertainty is not China, but the US. Despite good economic performance, incumbent President Joe Biden is lagging Donald Trump, according to The Wall Street Journal polling conducted in the first week of December.
Trump has a lead on Biden on most polls, with 37% of people polled saying if they were to vote now, it would be for Trump, and 31% for Biden. The race between the two will certainly be close, and the outcome will have implications worldwide.
Trump’s America First policy is likely to mean the US withdrawing its support for Ukraine, with Russia able to solidify its position in eastern Ukraine. It is hard to say if this will lead to US-led peace talks and a permanent settlement on the Ukraine issue. Given that the war has reached a stalemate, with the loss of life now senseless, peace talks should be encouraged.
It is hard to say how Trump’s China policy would be different a second time around, but he will probably not ease the trade war he started with China. The problem facing analysts, myself included, is his unpredictability.
From an SA perspective, the ANC has nailed its colours to the mast regarding Hamas and Russia. Given the ANC’s liberation struggle history and ideology, it is not surprising that the party has pitted SA against the traditional Western status quo countries. SA’s relationship with the other Brics countries is excellent, and the country therefore stands to benefit as the global order shifts away from the West.
The year 2024 will undoubtedly be one of drama and hope on the international realm. Might a Trump presidency lead to a resolution of the RussoUkrainian war? Could SA elect a more business- and growth-friendly coalition government? We live in hope.