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How China's economic pitfalls are a sign supply chain problems

    • 597 posts
    July 24, 2022 11:00 PM EDT

    How China's economic pitfalls are a sign supply chain problems might not be temporary

    China's shrinking economy is wreaking havoc on the world's supply chains, not to mention raising questions about the end of globalization, some analysts are warning. Others argue U.S. lack of interest in the global economic system is also partly to blame for globalization's downfall.To get more China economy news, you can visit shine news official website.

    One of the reasons for China's recent economic problems is Beijing's zero-COVID policy, creating a situation where a relatively small number of cases can result in large cities shutting down. Recent reports indicate that policy could last for the next five years, or until China eventually develops an mRNA vaccine.

    As a result, China's gross domestic product tumbled 2.6% in the second quarter from the first quarter. Officials were expecting a 1.5% decline and a revised 1.4% gain, Fox News Business reported earlier this month. In addition to the slowdown, reports Japan has overtaken Beijing as the largest holder of U.S. debt, with China's holdings dropping below $1 trillion for the first time in nearly 12 years.If that's not bad enough, Chinese citizens are experiencing bank runs in certain provinces.

    Protesters have been gathering at several financially troubled banks in China as depositors in Zhengzhou in Henan try to make withdrawals. Many depositors were prevented from traveling to the banks by health apps on their cellphones. Officials now say customers with deposits of 50,000 yuan, (about $7,400 dollars) can be reimbursed, with other customers getting their money back at a later date, ABC News reported."The possibility of recession or relapse for any economy — including China — cannot be overruled in the type of climate that seems most likely to prevail," said Roach, a senior fellow at Yale University and former Morgan Stanley Asia chairman.

    Geopolitical analyst Peter Zeihan argues there are two main problems — China's declining demographics and the U.S. stepping away from the global scene.These two factors, in addition to Russia's war in Ukraine, are shaking the pillars of the global order, according to Zeihan, author of the new book, "The End of the World is Just the Beginning."

    Much of today's nearly double-digit inflation is a result of supply chain crimps, economists believe.

    The U.S. and other nations must double their industrial and manufacturing capacity, Zeihan argues. If not, then inflation and other disruptions to the global supply chain will be a chronic problem for years to come, he claims.

    "It's not a straight line, Zeihan adds. "There are a lot of bumps along the road, there are a lot of things that we can and probably will get wrong. But the structural stuff we don't have to fight for. That's geographic, that's local, and that's demographic."U.S officials are taking notice of the speed bumps in U.S.-Chinese relations, though many still believe China will remain dominant in manufacturing unless the U.S. ramps up capacity.

    "We cannot allow countries like China to use their market position in key raw materials, technologies or products to disrupt our economy or exercise unwanted geopolitical leverage," Treasury Secretary Janet Yellen said in a speech in South Korea earlier this week.

    She believes China is angling to etch out a dominant position in the buildout of semiconductor technologies. Yellen is urging U.S. allies to bind together and exercise what she calls "friend-shoring" instead of off-shoring to China, an idea centered around diversifying and insulating supply chains to avoid disruptions.