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Is China's Economic Power Formidable?

Under President Xi Jinping's direction, China has been actively portraying itself as a potent trading partner and, at times, a fearsome foe. As Chinese prosperity soared and Western governments debated their reaction, the narrative of "The Rise of the East, and the Decline of the West" gained traction. However, a distinct narrative is starting to develop beneath the surface of economic hegemony.

Recent evidence suggests that China's march towards economic dominance around the world may not be as unstoppable as long thought. There are reasons why China's strength may not be as great as the West thinks it is, taking into account things like slow GDP growth, a sluggish real estate market, rising unemployment, and scepticism about the success of Xi Jinping's economic policies.

Economic Challenges: China's GDP growth remained dismally slow after being released from epidemic limitations. The housing market crisis and rising young unemployment rates are signs of underlying economic fragility. The hazy future raises questions about Beijing's policy towards the West, and it's unclear whether Xi would take a more amiable tone or pursue nationalism-driven programs.

Slow Growth: China's economy grew slowly in the second quarter of the year, with GDP rising by just 0.8% over the same period last year. The annual growth rate of 6.3 percent fell short of the anticipated 7.3 percent. This slowdown has effects on the world economy even if it is still healthier than most Western economies.

Reassessing Vulnerabilities: The governments of Europe and the United States are re-evaluating their financial risks, particularly in light of their dependence on China for essential raw resources. Discussions about "de-risking" from China and diversifying supply chains have been sparked by the current geopolitical tensions, such as Russia's invasion of Ukraine.

Declining Business Confidence: The Chinese economy's growing unpredictability is largely to blame for the sharp decline in business confidence among EU companies doing business there. In addition to a crackdown on digital titans, Xi's preference for state-owned businesses over private businesses has further undermined corporate trust, prompting some Western companies to consider quitting China completely.

The Shift in European Governments: Notably, France's President Emmanuel Macron has adopted a more critical stance towards China, particularly in light of its actions in Ukraine, and Italy's Prime Minister Giorgia Meloni has expressed a willingness to withdraw from Xi's global infrastructure initiative, the Belt and Road Initiative. This implies a change in how European nations view China's might.

While recent events suggest a less optimistic future, China's economy has grown faster than many Western economies. There are now concerns among businesses about Xi Jinping's economic policies, weak GDP growth, and the unstable real estate market. These issues cast doubt on China's unbeatable position in the world.

China's might is not as overwhelming as once thought, as Western governments re-evaluate their economic vulnerabilities and some businesses consider leaving China. It is vital to evaluate the true scope of China's impact and modify foreign strategy as the globe continues to change.


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