Whether an American–Chinese military conflict will occur, and whether the United States could defend against Chinese aggression, are subject to debate. But as Thérèse Shaheen made note of last month, there’s reason for cautious optimism as China’s historic economic strength fades in the wake of the Covid-19 lockdowns. Recent economic news suggests that her optimism may be well placed.
In recent weeks, the Chinese government has taken action to ease monetary policy in an attempt to boost domestic growth. On Monday, the government announced cuts to its repo rate, a measure of the interest on certain short-term-borrowing mechanisms. The move follows cuts to the deposit rates last week. Both announcements come on the verge of further cuts expected from the central bank as the Chinese economy struggles to recover from Covid-19. Economists noted for CNBC:
The decision is “probably not enough to stabilize the slowing growth momentum,” the economists said, adding that it is “almost certain” there will be a medium-lending facility rate cut this week.
But monetary easing might not be enough to support weak demand that’s been at the crux of China’s growth concern. The waning demand in housing is due to a “permanent loss of confidence,” the economists noted.
As Thérèse wrote in her piece, China also faces a debt problem to the tune of 300 percent of its GDP, along with a myriad of other economic and cultural challenges. The United States should continue to pursue a policy that prepares us for a possible conflict with China, but these facts serve as a sign that our adversaries are weaker than they claim to be.