China Dependency

Nature

Economic, Strategic, Geopolitical concept

Manifestations

Corporate reliance (e.g., Apple's manufacturing), financial reliance (emerging market loans), supply chain reliance

Impact on Global Trade

Fracturing of bilateral and world trade, efforts to de-Sinify/de-Americanise supply chains

Chinese Economic Context

Economy reliant on stimulus, faces challenges like declining tax revenues, real estate downturn, need to boost consumption

Motivations for Reduction

Risk management (for successors, regulatory risk), geopolitical tensions, trade wars

Impact on Emerging Economies

Financial dependence through commercial and sovereign loans (energy, mining sectors)

2023 (Autumn)

2024-03

2024-05 (Early)

Undated (Recent)

Emerging economies are also financially dependent on China through commercial and sovereign loans. The main recipient sectors (energy, mining

%20%E2%80%93%20just%20a%20couple%20of%20weeks%20after%20the%20United%20States%20and%20China%20had%20raised%20tariffs%20on%20one%20another%20to%20considerably%20more%20than%20100%%20%E2%80%93%20the%20communiqu%C3%A9%20was%20surprisingly%20sanguine.%0D%0A%0D%0AAt%20tariff%20rates%20of%20145%%20and%20125%%20respectively,%20bilateral%20trade%20would%20almost%20certainly%20have%20collapsed%20in%20what%20was,%20in%20effect,%20more%20trade%20embargo%20than%20trade%20war,%20with%20damaging%20consequences%20for%20both%20sides.%20But%20with%20a%20heavy%20dose%20of%20bravado,%20the%20politburo%20acknowledged%20that%20while%20China%20would%20have%20to%20prepare%20for%20external%20shocks,%20the%20economy%20was%20building%20resilience.%0D%0A%0D%0AA%20week%20later,%20the%20widely%20anticipated%20monthly%20business%20survey%20data%20for%20April%20revealed%20the%20biggest%20slump%20in%20export%20orders%20since%20the%20zero-Covid%20policies%20implemented%20in%202021-22.%20This%20was%20a%20bad%20omen%20for%20an%20economy%20that%20has%20been%20struggling%20for%20years%20to%20build%20up%20domestic%20consumer%20demand,%20and%20to%20confront%20debt%20capacity%20and%20deflation%20risks,%20along%20with%20a%20compression%20in%20business%20profits%20and%20wages.%0D%0A%0D%0AChina%20now%20faces%20additional%20threats%20to%20tens%20of%20millions%20of%20jobs.%20So,%20it%20is%20small%20wonder%20that%20its%20government%20was,%20like%20the%20US%20administration,%20prepared%20(according%20to%20reports)%20to%20kick%20off%20talks%20when%20senior%20officials%20met%20at%20the%20International%20Monetary%20Fund%20(IMF)%20meetings%20in%20Washington%20the%20week%20before%20the%20politburo%20meeting.%0D%0A%0D%0AThe%20major%20focus%20on%20who%20blinked,%20or%20compromised%20more,%20is%20of%20fleeting%20significance.%20The%20reality%20is%20that%20both%20sides%20were%20probably%20relieved%20to%20have%20reached%20a%20tentative%20agreement%20in%20Geneva%20in%20early%20May%20to%20roll%20back%20most%20of%20the%20tariff%20increases%20for%2090%20days%20and%20to%20restart%20talks%20about%20trade%20and%20perhaps%20other%20things%20too.%0D%0A%0D%0AWith%20this%20as%20backdrop,%20it%20is%20worth%20refreshing%20on%20the%20state%20of%20China%E2%80%99s%20economy,%20and%20why%20such%20excruciatingly%20high%20tariffs%20might%20have%20had%20(or%20may%20yet%20still%20have)%20such%20deleterious%20effects%20on%20what%20remains%20an%20economy%20suffering%20fatigue%20and%20malaise,%20as%20well%20as%20being%20dependent%20on%20persistent%20stimulus.%0D%0A%0D%0AThe%20Chinese%20economy%20is%20on%20a%20stimulus%20wave%20for%20the%20time%20being%0D%0A%0D%0AChina%E2%80%99s%20economy%20had%20a%20bright%20start%20to%20the%20year,%20according%20to%20official%20data,%20with%20GDP%20growing%20by%201.2%%20in%20the%20first%20quarter%20over%20the%20previous%20quarter,%20and%20by%205.4%%20over%20a%20year%20ago.%20The%20official%20growth%20target%20for%202025%20is%20around%205%.%0D%0A%0D%0AExports%20have%20been%20booming%20for%20a%20while%20and%20that%20trend%20has%20continued%20into%20this%20year.%20There%20have%20even%20been%20some%20signs%20that%20parts%20of%20the%20real%20estate%20sector%20are%20doing%20better,%20although%20from%20a%20very%20depressed%20level%20(more%20below).%0D%0A%0D%0AIt%20should%20also%20be%20noted%20that%20the%20economy%20is%20still%20coasting%20a%20bit%20after%20several%20fiscal,%20monetary%20and%20real%20estate%20stimulus%20measures%20were%20announced%20last%20autumn%20to%20boost%20consumer%20spending,%20home%20sales,%20public%20borrowing%20and%20liquidity.%0D%0A%0D%0ABut%20economic%20momentum%20was%20predicted%20to%20fade%20as%20the%20year%20continued,%20with%20full-year%20growth%20possibly%20hitting%204.75-5%,%20mostly%20because%20of%20the%20buoyant%20first%20quarter.%20Sceptics%20thought%20that%20underlying%20growth%20might%20slow%20to%204%%20or%20even%20less%20by%20late%20this%20year,%20and%20that%20the%20government%20would%20need%20to%20come%20up%20with%20more%20debt-financed%20stimulus%20even%20to%20achieve%20that.%0D%0A%0D%0AThe%20outcome%20of%20the%20Geneva%20talks,%20if%20sustained%20after%20the%2090-day%20pause,%20would%20still%20represent%20a%20worse%20outcome%20than%20if%20the%20tariff%20regime%20in%20place%20when%20Donald%20Trump%20returned%20to%20office%20had%20remained.%20But%20China%20could%20probably%20soldier%20on%20through%20it,%20allowing%20the%20exchange%20rate%20to%20decline%20to%20compensate,%20and%20shipping%20more%20exports%20via%20third%20countries%20to%20benefit%20from%20lower%20tariffs.%0D%0A%0D%0AIn%20any%20event,%20if%20the%20economy%20were%20as%20resilient%20and%20well-ordered%20as%20Xi%20Jinping%E2%80%99s%20government%20insists,%20it%20is%20hard%20to%20see%20why%20all%20those%20measures%20were%20needed%20last%20year,%20why%20the%20government%20has%20continued%20to%20sound%20warnings%20about%20prospects,%20and%20why%20persistent%20stimulus%20is%20required.%0D%0A%0D%0AIn%20early%20May,%20the%20central%20bank%20%E2%80%93%20the%20People's%20Bank%20of%20China%20%E2%80%93%20eased%20policy%20yet%20again%20by%20cutting%20already%20low%20benchmark%20interest%20rates%20to%201.4%,%20and%20reducing%20banks%E2%80%99%20reserve%20requirement%20ratios,%20measures%20that%20are%20expected%20to%20add%20about%20one%20trillion%20yuan%20in%20liquidity.%0D%0A%0D%0AThe%20central%20bank%20also%20announced%20supplementary%20measures%20to%20support%20consumption,%20elderly%20care%20and%20the%20technology%20sector%20by%20setting%20up%20or%20expanding%20re-lending%20programmes%20or,%20in%20effect,%20cheap%20funding%20facilities.%20Although%20monetary%20stimulus%20is%20likely%20to%20be%20relatively%20ineffective%20in%20current%20circumstances,%20more%20announcements%20are%20expected.%0D%0A%0D%0AThe%20government%20had%20already%20announced%20in%20March%20that%20the%20fiscal%20deficit%20%E2%80%93%20the%20gap%20between%20public%20revenue%20and%20public%20spending%20%E2%80%93%20would%20be%20increased%20this%20year%20as%20more%20public%20borrowing%20would%20be%20approved.%20This%20was%20partly%20to%20subsidise%20a%20consumer%20new-goods-for-old%20programme,%20but%20also%20to%20refinance%20indebted%20local%20governments,%20to%20fund%20industrial%20policies,%20to%20expand%20production%20and%20to%20recapitalise%20the%20major%20banks.%0D%0A%0D%0ABut%20fiscal%20stimulus%20in%20China%20isn't%20as%20straightforward%20as%20many%20think%20it%20should%20be.%20The%20official%20fiscal%20deficit%20has%20been%20set%20this%20year%20at%203%%20of%20GDP,%20but%20this%20is%20a%20very%20narrow,%20largely%20central%20government-related%20definition.%20There%20are%20also%20several%20off-balance%20sheet%20funds%20that%20need%20to%20be%20added,%20many%20of%20which%20are%20administered%20by%20local%20governments.%20This%20takes%20the%20deficit%20to%20about%208.5-9%%20of%20GDP%20in%202025,%20and%20probably%20still%20higher%20in%202026.%20The%20IMF%E2%80%99s%20%E2%80%98augmented%20fiscal%20deficit%E2%80%99,%20which%20comprises%20still%20broader%20public%20sector%20liabilities,%20is%20not%20far%20from%20double%20the%202025%20estimate.%0D%0A%0D%0AThe%20government%E2%80%99s%20fiscal%20dilemma%20is%20that%20tax%20revenues%20have%20been%20declining.%20This%20is%20a%20result%20of%20both%20the%20weakness%20of%20the%20economy%20(especially%20in%20investment%20and%20real%20estate%20to%20which%20the%20economy%20is%20geared)%20and%20excessively%20low%20inflation%20(or%20deflation).%20What%E2%80%99s%20more,%20it%20can%20only%20raise%20taxes%20by%20further%20damaging%20the%20economy.%0D%0A%0D%0AAt%20the%20same%20time,%20it%20could%20keep%20sanctioning%20more%20borrowing,%20which%20the%20banks%20in%20China%20would%20be%20obliged%20to%20underwrite.%20But%20this%20would%20severely%20inhibit%20the%20banks%E2%80%99%20ability%20to%20make%20loans%20to%20boost%20growth%20and%20their%20own%20capital%20adequacy.%0D%0A%0D%0AThe%20other%20option%20would%20be%20simply%20to%20print%20money,%20but%20that%20would%20almost%20certainly%20create%20strong%20downward%20pressure%20on%20the%20exchange%20rate,%20which%20would%20trigger%20new%20sources%20of%20financial%20instability.%20The%20two%20main%20levers%20of%20economic%20control%20in%20China%20%E2%80%93%20fiscal%20revenues%20and%20financial%20credit%20%E2%80%93%20are%20almost%20out%20of%20gas,%20so%20to%20speak,%20or%20at%20least%20severely%20constrained.%20What%20else%20could%20it%20do?%0D%0A%0D%0ABoosting%20consumption%0D%0A%0D%0AThe%20obvious%20answer%20is%20to%20boost%20consumption,%20which%20the%20government%20has%20said%20for%20months%20is%20the%20top%20priority.%20But%20it%20is%20remarkable%20that%20it%20has%20been%20trying%20to%20do%20this%20for%20many%20years,%20and%20that%20even%20today,%20the%20main%20tools%20are%20blunt.%0D%0A%0D%0APlans%20to%20boost%20consumption%20have%20been%20rolled%20out%20ever%20since%20the%20global%20financial%20crisis%20of%202007-09.%20These%20have%20comprised%20tax%20reductions%20and%20vouchers,%20urbanisation%20proposals,%20policies%20to%20boost%20the%20supply%20of%20consumer%20products,%20the%20development%20of%20e-commerce,%20relaxation%20of%20purchase%20restrictions%20on%20homes%20and%20cars,%20new-goods-for-old%20trade-in%20programmes%20and%20incremental%20changes%20to%20social%20welfare.%0D%0A%0D%0ABut%20these%20attempts%20have%20barely%20lifted%20the%20consumption%20share%20of%20GDP%20from%20its%2036%%20nadir%20a%20few%20years%20ago.%20Even%20at%20around%2040%,%20the%20consumption%20share%20is%20well%20below%20the%2060%%20or%20so%20recorded%20both%20in%20many%20advanced%20economies%20and%20in%20China%E2%80%99s%20middle-income%20peer%20group%20of%20countries.%0D%0A%0D%0AWhile%20the%20government%E2%80%99s%20political%20messaging%20is%20clear,%20there%20has%20been%20little%20in%20the%20way%20of%20new%20spending%20or%20funding%20for%20income,%20employment,%20tax%20reform%20or%20welfare%20programmes,%20and%20certainly%20nothing%20that%20would%20transfer%20economic%20ownership%20and%20therefore%20political%20power%20to%20households%20and%20private%20firms%20from%20the%20state%20sector.%0D%0A%0D%0AReal%20estate%20%E2%80%93%20signs%20of%20life%20in%20a%20long%20downturn%0D%0A%0D%0APart%20of%20the%20reason%20for%20the%20recent%20and%20continuing%20weak%20state%20of%20consumption%20is%20the%20enduring%20weakness%20in%20China%E2%80%99s%20real%20estate%20market.%20Prices%20have%20fallen%20on%20average%20by%20about%2020-30%%20since%20the%20housing%20peak%20in%20August%202021,%20and%20they%20were%20still%20falling%20in%20most%20cities%20in%20March.%0D%0A%0D%0AIn%20some%20of%20the%20larger%20cities%20%E2%80%93%20such%20as%20Beijing,%20Guangzhou,%20Shanghai%20and%20Shenzhen%20%E2%80%93%20sales%20and%20prices%20have%20shown%20some%20signs%20of%20revival%20following%20a%20slew%20of%20housing%20sector%20relief%20measures%20adopted%20in%20the%20last%20two%20to%20three%20years.%20This%20trend%20hasn%E2%80%99t%20carried%20through%20to%20smaller%20cities,%20where%20the%20bulk%20of%20the%20oversupply%20and%20weakest%20conditions%20exist,%20and%20where%20excess%20inventory%20continues%20to%20rise.%0D%0A%0D%0AIndustry%20analysts%20think%20that%20it%20could%20take%20another%20five%20years%20in%20some%20cities%20for%20the%20market%20to%20find%20a%20floor,%20but%20maybe%2010-15%20years%20in%20many%20others.%0D%0A%0D%0AThe%20country%E2%80%99s%20demographics%20do%20not%20help.%20The%20first-time%20buyer%20age%20cohort%20(those%20around%2025-35%20years%20old)%20is%20expected%20to%20decline%20in%20numbers%20for%20the%20foreseeable%20future.%20With%20household%20formation%20weak,%20plus%20a%20widespread%20decline%20in%20marriage%20rates,%20the%20demand%20for%20housing%20is%20likely%20to%20be%20perhaps%20half%20or%20less%20of%20what%20it%20was%20in%20the%20boom%20years.%0D%0A%0D%0AAll%20that%20said,%20housing%20construction%20has%20fallen%20so%20much%20%E2%80%93%20by%2050-60%%20%E2%80%93%20that%20a%20cyclical%20recovery%20may%20yet%20happen%20to%20bring%20construction%20back%20to%20trend.%20Nevertheless,%20the%20sector%20is%20likely%20to%20remain%20under%20pressure%20for%20years%20to%20come.%0D%0A%0D%0AIn%20addition,%20more%20and%20more%20real%20estate%20is%20reverting%20to%20state%20control,%20as%20private%20developers%20go%20bust%20or%20are%20operationally%20impaired.%20This%20may%20help%20to%20stabilise%20the%20market,%20but%20at%20the%20cost%20of%20yet%20more%20wasteful%20decision-making%20and%20capital%20misallocation.%0D%0A%0D%0ATrade%20killer%20and%20relief%0D%0A%0D%0APost-Geneva,%20the%20US%20tariff%20on%20Chinese%20products%20now%20comprises%20a%20baseline%2010%,%20plus%2020%%20related%20to%20fentanyl.%20Combined%20with%20other%20sectoral%20tariffs,%20and%20some%20exemptions,%20the%20effective%20rate%20is%20about%2040%.%0D%0A%0D%0AThe%20Chinese%20tariff%20on%20US%20products%20is%2010%,%20which%20with%20other%20measures%20makes%20the%20effective%20rate%20about%2025%.%20Of%20course,%20these%20levels%20are%20far%20lower%20than%20they%20were%20a%20month%20ago,%20but%20far%20higher%20than%20they%20were%20before%20Trump%20returned%20to%20office.%0D%0A%0D%0AWe%20should%20remember%20too%20that%20the%20full%20array%20of%20commercial%20measures%20that%20both%20sides%20deploy%20includes:%20export%20controls;%20entity%20lists%20that%20preclude%20business%20with%20designated%20firms;%20restrictions%20on%20products%20or%20firms%20that%20produce%20dual%20use%20(civilian%20and%20military)%20goods%20and%20services;%20foreign%20investment,%20semiconductor%20and%20artificial%20intelligence%20(AI)%20controls;%20and%20Trump%E2%80%99s%20America%20First%20investment%20policy,%20which%20seeks%20to%20brush%20China%20out%20of%20US%20supply%20chains,%20certainly%20in%20North%20America.%0D%0A%0D%0AThere%20is%20little%20question%20that%20even%20if%20the%20new,%20lower,%20tariff%20rates%20endure,%20there%20will%20be%20a%20persistent%20fracturing%20in%20bilateral%20and%20world%20trade,%20with%20both%20China%20and%20the%20United%20States%20seeking%20to%20de-Americanise%20and%20de-Sinify%20their%20own%20supply%20chains.%0D%0A%0D%0AFor%20China,%20the%20incentive%20to%20use%20exchange%20rate%20depreciation%20to%20compensate%20for%20weaker%20shipments%20to%20the%20United%20States%20and%20to%20use%20third%20countries%20to%20ship%20products%20indirectly%20will%20remain%20strong.%20This%20also%20contextualises%20Trump%E2%80%99s%20attempt%20to%20get%20countries%20such%20as%20India,%20Mexico%20and%20Vietnam%20to%20agree%20trade%20arrangements%20that%20are%20more%20friendly%20to%20Washington%20than%20to%20Beijing.%0D%0A%0D%0AThe%20impact%20on%20the%20Chinese%20and%20American%20economies%20is%20likely%20to%20be%20remarkable%20still%20but%20manageable,%20certainly%20much%20more%20so%20than%20might%20have%20been%20the%20case%20before%20the%20Geneva%20meeting.%20Unsurprisingly,%20the%20yo-yo%20nature%20of%20economic%20forecasting%20for%20China%20and%20the%20United%20States%20this%20year%20has%20now%20embraced%20a%20modest%20upgrade,%20for%20the%20time%20being%20at%20least.%0D%0A%0D%0ABut%20everything%20is%20relative,%20and%20the%20underlying%20fundamentals,%20as%20well%20as%20the%20structure%20of%20the%20US-China%20relationship,%20continue%20to%20look%20precarious.%0D%0A%0D%0AWhere%20can%20I%20find%20out%20more?%0D%0A%0D%0AChina%20vows%20in%20politburo%20meeting%20to%20support%20firms,%20workers%20affected%20by%20tariffs:%20Reuters%20article.%0D%0A%0D%0AThere%20are%20two%20Chinas,%20and%20America%20must%20understand%20both:%20article%20by%20Li%20Yuan%20in%20the%20New%20York%20Times.%0D%0A%0D%0AThe%20World%20Bank%20in%20China:%20link%20to%20World%20Bank%20articles%20and%20reports%20on%20China.%0D%0A%0D%0AThe%20contentious%20US-China%20trade%20relationship:%20Council%20on%20Foreign%20Relations.%0D%0A%0D%0AUnderstanding%20the%20temporary%20de-escalation%20of%20the%20US-China%20trade%20war:%20Centre%20for%20Strategic%20and%20International%20Studies.%0D%0A%0D%0AWho%20are%20experts%20on%20this%20question?%0D%0A%0D%0AGeorge%20Magnus%0D%0A%0D%0ARobert%20Elliott%0D%0A%0D%0AAuthor:%20George%20Magnus%0D%0A%0D%0APhoto:%20Hung%20China%20Liu%20for%20iStock%0D%0A%0D%0ASource:%20https://www.economicsobservatory.com/how-is-chinas-economy-faring) It should also be noted that the economy is still coasting a bit after several fiscal, monetary and real estate stimulus measures were announced last autumn to boost consumer spending, home sales, public borrowing and liquidity. We should remember too that the full array of commercial measures that both sides deploy includes: export controls; entity lists that preclude business with designated firms; restrictions on products or firms that produce dual use (civilian and military) goods and services; foreign investment, semiconductor and artificial intelligence (AI) controls; and Trump’s America First investment policy, which seeks to brush China out of US supply chains, certainly in North America. There is little question that even if the new, lower, tariff rates endure, there will be a persistent fracturing in bilateral and world trade, with both China and the United States seeking to de-Americanise and de-Sinify their own supply chains.

Press "Enter" to skip to content Global Political Theory While the oppression identified in dependency theory is typically associated with the US and Europe, China is a rising global power. Skeptics point to infrastructure that has created environmental concerns, crossed borders and created conflict, and projects that remain unfinished due to unpaid debt. Dependency theory has historically pointed to Latin America as dependent on its oppressors to survive. They export to developed countries, particularly the US, which turn their natural resources into finished goods. This demonstrates the remaining effects of historical power dynamics. Monthly Review Press. Published in East Asia, South America, Cross-Cultural Comparisons, United States of America, Americas, Central America and 21st century

In the People's Republic of China, politics functions within a socialist state framework based on the system of people's congress under the leadership of the