At the recent World Economic Forum convened in Davos, Switzerland, business and political leaders expressed general pessimism about the global economy for 2024 due to geopolitical conflicts and other uncertainties.
Economic observers suggest that China’s sluggish economy will be further exacerbated amid a weakening global economic landscape, which is partly reflected in foreign capital outflows and soaring energy costs, among others.
Speaking at the Davos Forum, European Central Bank President Christine Lagarde said she does not expect the global economy to return to “normality” in 2024 as the post-pandemic period is “strange, extraordinary, and difficult to analyze.”
“Consumption is still a driving force for growth, but the tailwind that we had the benefits of is gradually fading,” she said, indicating that consumers are saving less, and spending is weak.
Uncertainties affecting the economic forecast include geopolitical conflicts, unrest in the Red Sea, and leadership elections in multiple countries, according to Ngozi Okonjo-Iweala, director general of the World Trade Organization.
Socialism Brings ‘Economic Risk’
Uncovering the causes of the global economic predicament, Argentine President Javier Milei called on delegates from various countries at the Davos Forum to reject socialism and embrace “free enterprise capitalism.”
“The main leaders of the Western world have abandoned the model of freedom for different versions of what we call collectivism. We’re here to tell you that collectivist experiments are never the solution to the problems that afflict the citizens of the world—rather they are the root cause,” Mr. Milei said.
U.S.-based political and economic analyst Lu Yuanxing, a former marketing executive at a Chinese company, told The Epoch Times that he is also not optimistic about the global and Chinese economies in 2024.
Rising Military Expenses
Zheng Xuguang, a political-economic scholar, told The Epoch Times on Jan. 22 that this year’s world economic outlook is also affected by the state of readiness among powerhouses.Concerning regional turbulences, French President Emmanuel Macron has requested the defense industry to shift to a “war economy mode” to support Ukraine since Russia provoked the war in February 2022; The UK defense secretary said last July that the post-Cold War “peace dividend” has ended and that in the next five years, the country may face several battlegrounds involving Russia, China, Iran, and North Korea; German Defence Minister Boris Pistorius told Welt am Sonntag in last December that it may face a war initiated by Russia in seven or eight years.
Decline in Foreign Capital in China
The ongoing accelerated withdrawal of foreign capital from China will lead to a decline in that nation’s national income, Mr. Zheng said.“More money raises wages and labor prices, while less money tends to lower labor prices and reduce domestic demand,” he said, so the withdrawal of foreign capital “directly affects wages and labor.”
Foreign investment in China dropped to an all-time low in 2023. In addition to traditional foreign direct investment (FDI), demand for Chinese goods weakened, foreign companies continued allocating their supply chains outside of China, and even the number of students and tourists traveling to China declined dramatically.
Figures calculated by the Financial Times show that FDI in China has continuously decreased by double digits since May 2023; by September, it had plummeted by 34 percent year-on-year to 72.8 billion yuan (about $10 billion), the most significant drop since 2014 when monthly data began to be recorded.
Direct investment liabilities, a measure of FDI that includes retained earnings of foreign-owned enterprises in China, posted a deficit of $11.8 billion in the third quarter of 2023 (July–September).
The continued decline in FDI suggests that China is less attractive to foreign investors than it once was. Although they have yet to entirely withdraw from investing in China, the number is decreasing, Mr. Zheng said.
Misleading Data
China’s National Bureau of Statistics released the 2023 per capita disposable income data on Jan. 19, boasting that the nation’s income in 2023 increased from the previous year, with Shanghai and Beijing having annual per capita disposable incomes of more than 80,000 yuan (about $11,240); all 31 provinces realized positive growth in annual per capita disposable incomes.Mr. Lu believes the so-called indicator of per capita income is misleading. “If a super-rich” person resides in an impoverished village, “averaging his wealth among the local population” would lead to the false conclusion that everyone is moderately prosperous, he said.
The Chinese Communist Party (CCP) has been fabricating economic data to mislead the world, he said. Such false official data has affected the judgment of Western business leaders.
International rating agencies are not aware of how serious “the CCP’s counterfeiting is, and they rely too much on superficial economic data for their analysis,” he said, citing the Chinese GDP growth rate of 5.2 percent as another datapoint that deceives “itself and others.”
In July 2023, CCP authorities stopped releasing youth unemployment data, presumably because its outlook was unfavorable.
Regarding the extent to which China’s economic slowdown will pose a risk to global finance, Mr. Lu said that its impact should not be exaggerated.
Some economists have argued that it will have a significant impact, but “the industrial chain has moved outside China, so in production, China’s influence on the world will gradually diminish,” he said, adding, however, as China’s economy worsens, “the lives of the Chinese people may become more and more miserable.”
