foreign [Music] episode of inside she's China the great game plan in this series I've covered a long Arc of China's past the tumultuous years that led to its creation the story of its economic rise the many wars it fought and the inner battles it is still fighting under the leadership of its current president Xi Jinping this has been a one of a kind documentary series that has demystified the Intrigue that has traditionally enveloped China the series unravel China and its various facets from the bloody past struggles that have been part of Chinese polity since 1949 to the cracks in its much touted economic model to providing insights into the minds of the leaders that shaped China's past and present in the final episode we find out what lies ahead for China as Xi Jinping continues his aggressive March this documentary Series has been an exploration of China's past to gauge its future so in the next decade will the world continue to witness China's rise or could it be the decade of China's demise a lot of this depends on how soon and how efficiently Xi Jinping manages to tide over China's growing fault lines [Music] thank you [Music] one of the biggest challenge for the Communist party is the slowing Chinese economy from The Carter at the bottom of the leadership pyramid till the general secretary at the top the entire CCP Machinery is aware that their political legitimacy stems from the vibrancy of the Chinese economy slowing growth will weaken the premise of its hold both within and outside China under Xi Jinping the Chinese economy is breaking a 32 year old record in 2022 its economy will officially grow slower than the American economy the last time it happened was in 1990 in the aftermath of the Tiananmen Square massacre slowing economy stretched banking sector and the growing likelihood of Hong Kong losing its gene as a hub for Global Finance are all part of a larger problem just like the ghost towns across China are symptomatic of the larger problem that plagues its overheated property sector that of misguided economic decisions now add to this heavy concoction the series of policy changes by Xi Jinping communist centralization of the economy cracked down against business tycoons and a Statewide Focus away from American style consumerism what one gets is an economy that is skating on thin ice even the Reds know this Xi Jinping is closing China off from the outside world so as time progresses we know less and less about what's happening at the top of the Communist party and through Chinese Society in general this is something that Mao Zedong did it's also something that Chinese Emperors did during two Millennia of Imperial Rule and we know that every time it's occurred disaster has followed for China and the Chinese people so um unfortunately there are many things and many critical things that we do not comprehend about China today the liberal Zhao Jiang who was ousted as the General Secretary of the Communist Party In 1989 for advocating dialogue with protesting students at Tiananmen Square probably summed up China's economic model Jiang had lamented our biggest problem is that everything is owned by the state 30 years later after witnessing a major economic boom after a general loosening of State Control XI jinping's policies are aimed at reversing some of these decisions this means Xi Jinping wants the state to take back parts of the economy from the private sector state-owned Enterprises are the primary vehicles for the Communist Party to control and direct the economy China's state-owned Enterprises already comprise about a third of the entire economy and any further concentration of economic power in these behemoths will take the sheen off the Chinese economy due to the inefficiency and inherent Corruption of the state-owned Enterprises but for the state these companies are the preferred children state or Enterprises receive lower interest rates when they borrow money they enjoy lower tax rates as compared to private companies and have access to Precious resources despite this state-owned Enterprises have a poor track record relative to private companies for instance productivity per person in the aluminum sector for China's state-owned Enterprises is just one-seventh of their private competitors despite some efforts to reform state-owned Enterprises over the last few decades these giant companies have resisted change by using their proximity to par instead of being downsized or reformed these highly inefficient companies are now being elevated the idea is to increase State's control in economic activity and lead to more concentration of power in Just a handful of state-owned companies of course for the CCP it's far easier to control fewer state-owned large companies than a larger number of smaller private Enterprises the CCP style of handling the economy through its growth years has been that of choosing its preferred companies and providing them with a variety of benefits a natural outcome of this process of creating State favored Enterprises has led to an epidemic of overproduction across all major sectors till the 2008 financial crisis this over capacity was absorbed domestically but since then it has become a major factor leading to ever-growing piles of debt in fact China's debt is the largest ever recorded for a developing country and has quadrupled from Seven trillion dollars in 2007 to 28 trillion dollars in 2014 and it reached 34 trillion dollars by 2018. China's GDP during this period was 3. 55 trillion dollars in 2007 and 12.
2 trillion dollars in 2017. so China added a GDP of 8. 6 trillion dollars against a debt of 27 trillion dollars this was driven by excess capacity even now state-owned Enterprises continue to over produce to pump Prime the economy reaffirming the Vicious Cycle of debt since statehood Enterprises serve political requirements fiscal Prudence is hardly a parameter they are evaluated on the debt is also a direct consequence of the creation of excessive real estate an economic problem that is not unique to China but more pronounced in the world's second largest economy ghost towns across China have a story to tell that of misappropriation corruption and excessive speculation go cities in China have mushroomed due to two main reasons one is that local governments boost local economies through the real estate sector as per open Edition journal in 2017 the residential sector has replaced the manufacturing sector as the primary driver of most local economies the real estate sector accounts for 29 of the economy therefore residential and commercial land expands quicker than housing demand you know there's no shortage of corruption at the local government level uh the the debt you know probably doesn't go away right away they continue to borrow I I think there it might require some sort of event some sort of capital markets event you know like a default uh from a a big especially a big dollar borrower but but even a big default in in local currency you know there's probably not much room for any any sort of uh any sort of crash or you know event that that you know sort of a Black Swan event there's really little room for that because of the of the real estate bubble popping of the middle class debt crisis the the mortgage payment uh the delinquencies are are high so look this isn't just public debt it's private debt it's an aging population there's there's very little retirement support of you know in in this built into the system the the disastrous one-child policy continues to rear its ugly head and don't forget you know you asked about the local level there's still massive rural poverty in China which takes us to the second reason for the excessive real estate crisis which is the focus on house ownership in China which stands at a whopping 90 percent this is much higher than the average in developed countries where savings are routed to equity markets and debt instruments and not just pumped into the real estate sector in China 90 percent of residents invest in the real estate sector and just seven percent in the equity markets in most developed markets though 52 citizens own stocks and only 65 percent have house ownership this explains the tendency of property markets to become Havens for speculation black money and Corruption Chinese Regulators on their paths have encouraged speculation by not imposing any housing tax given this excessive Reliance on the property market for parking of savings and its primary use as a vehicle of speculation rather than housing needs vacancy rate of Chinese Realty is also much higher at 20 vacancy rate in China is much more than other developed markets be it Japan and America this means one in every five project is officially awakened in China that's why when one travels across Chinese cities the sheer scale of ghost towns or infrastructure without people inhabiting them becomes so glaring but this cannot be corrected till the underlying property Market remains overvalued and over leveraged as per Nika Asia China's nominal GDP is 70 percent of U.
S but real estate prices are 2. 6 times that of America but it's not just prices real estate sector also impacts the banking sector property related loans account for 39 of total outstanding loans at China construction Bank Corporation and 38 at Bank of China these are the second largest and the fourth largest banks in China respectively you know the commercial I mean the real estate bubble is is starting to burst you've got you know you mentioned a middle class debt crisis you've seen mortgage boycotts that probably gets worse before it gets better this is something that's that's really unsettling now grant that the central bank has come out and lowered interest rates you know that might help they I think they understand that this this could get worse before it gets better but again with lockdowns and and some of the obvious demographic challenges that are have been historic they're not new but they're they're only getting worse again getting worse before it gets better with the Aging of the population so a lot of a lot of the the borrowers in China have never really gone through this they've only experienced property markets that continue to go up debts that that is that is easily provided so this this could really be unsettling for the Chinese economy but also for Chinese Society but it's not just about economy as Xi Jinping seeks greater control what he should be bracing for is more pushback both at home and abroad China is perhaps one of the few countries that spends more on policing its own people than on its National Defense deployment of facial technology 24 7 cameras linking of all personal and private data keeping track of every banking transaction and constant monitoring of citizens digital presence comes at a cost this cost is a whopping 190 billion dollars per year between 2007 and 2018 public security costs in China tripled to 193 billion dollars a year this was 19 more than comparable figures in America and about a fifth more than China's external defense budget which stood at 175 billion dollars so for the Communist Party of China the threat from its own people is far more pronounced than any external hostile threat that China May face security related expenditures in sensitive regions such as xinjiang and Tibet have risen so rapidly that they now exceed the United States average on a per capita PPP basis as China continues to invest heavily in developing ever more advanced security Technologies even residents living in better economic conditions in large Metropolis will start questioning the party the intrusive facial technology which China took 10 years to develop links everything from Subway tickets to bank transactions to taxi rights the organized and vast snooping Network that the Communist Party uses to control its people looks perfect but is waiting to snap if there is one catalyst that could be social political or an economic one but what seems likely is that every dollar spent in domestic Security will cause a pushback these figures reveal the cost of maintaining stability across China's troubles provinces and especially in the restive minority regions the Tibetan autonomous region and the xinjiang region May witness further strain which will attract immense Global outrage in the post-covet geopolitical framework despite state-controlled media and state monitored internet crackdowns will alienate China from its leader incidentally Xi Jinping has chosen to remain inside China for more than two years since the outbreak of coronavirus pandemic this is reflective of his parochial view of leading a country in a mouse style template Mao had no ties with the vest for over two decades after China's formation and remained largely in his communist ecosystem is trying to follow the similar template with a tight grip on par and control of all three power centers the party the presidency and the military it is unlikely that Xi Jinping will face a credible challenger but what he may face is a stronger party apparatus challenging his strong man persona to survive any such threat Xi Jinping is likely to resort to increased military belligerence this could be either in the South China Sea against Japan and Taiwan or against India in ladakh or in the Indian Ocean at the hamantota port OTA is a backward was a backward region in Sri Lanka so successive governments sought to sought to uh to develop it and now we the Chinese government provided a loan to develop it subsequently China converted that into an investment but it is basically a commercial pot and and the Sri Lanka government has enabled presence there uh there is a industrial Zone that hopefully will be built around it so the sustainability of these projects obviously is important and that is something the government is keeping an eye on every leader is aware of the larger galvanizing effect that an armed conflict has on the masses Xi Jinping is no different chasing history and Desiring a name in record books provocative gestures in Taiwan seems like a natural Corollary what Mao could not achieve despite winning wars is what Xi Jinping wishes to conquer Taiwan military theatrics will also ensure that the party and its new great helmsmen do not loosen their iron grip over China it is the future shape that formations like the quad and the orcas may take that will decide whether China's war cry will remain an empty hoax or be more than that besides America it will be India and Japan that will decide the future framework of a concerted pushback to China besides being the second and third largest economies in Asia both these countries pose a direct threat to XI jinping's idea of establishing his hegemony all over Asia though XI jinping's policies are being questioned within China it does not mean that his presidency is under threat in the immediate future in all possibility it will be a weakened Xi Jinping who will rule China after the 20th party Congress meeting in October 2022.
