China experienced a high rate of growth in its gross domestic product (GDP) during the last three decades. However, the Chinese economy now is at a watershed. The once double-digit growth rate exceeding 10% is giving way to a current rate of growth estimated by leading analysts to be in the range of 3% to 5% for 2023. This slowdown in the Chinese economy is likely to be the new normal for the immediate short term and beyond. In order for China’s economy to grow, it needs to continue to export goods to the United States, Europe, and other emerging economies. Moreover, China needs to continue to attract foreign investment.
These are challenges immense. Moreover, China’s youth unemployment is in the range of 21% to 30%. Additionally, China is facing an aging population along with a crisis in its shadow banking system which is sitting on significant debts that may not be collected. Furthermore, deflation is also on the horizon and consumer spending is not growing as anticipated. The return to economic growth after COVID-19 did not materialize. Thus, the Chinese government needs to reduce the obstacles for foreign multinational companies, treat foreign firms fairly, and declare the country to be open to global business. Moreover, the high level of Chinese subsidies to state-owned enterprises should decline in order for a fair and nondiscriminatory level playing field that must be seen as equitable by foreign multinational firms.
Reaching out to BRICS members and implementing the belt and road initiatives
The recent meeting of Brazil, Russia, India, China, and South Africa (BRICS) in Johannesburg was an attempt to enlarge the group and give BRICS a larger role in global trade and the global financial system. Argentina, Iran, Saudi Arabia, United Arab Emirates, Egypt, and Ethiopia were recently invited to join BRICS by January 2024. As seen by China this new realignment, could improve the bargaining power of its economy vis-à-vis the United States and serve as a counterweight to what the group believes to be a U.S. and Western-centric global dominance. Xi Jinping, China’s leader, described this as a historical expansion to enhance BRICS countries’ positions and lead to a counterbalance to the U.S. dominant global financial system. He labeled this “nonwestern” enhancement of the Global South. The U.S., needless to say, supports the economic improvement of the Global South and other emerging economies as long as it is built upon transparency, openness, and the development of global free markets.
BRICS’ share of the global GDP in 2023 was 26% and this enlargement could increase their share to 34%, and China’s share of the BRICS GDP to 70%. However, this increase in the power of China is of concern to India, its traditional antagonist. Furthermore, China’s Belt and Road Initiatives (BRI) were intended to improve the place of China in the global economy and improve the economies of participating countries. However, the benefit of the BRI is yet to materialize.
Tentative Chinese challenges and obstacles
The issues related to the economic growth of China hinge upon a complex set of factors and variables. While China has invited multinational firms, the interests of global corporate players and stakeholders may not align fully with China. Moreover, the Chinese are facing an aging population, and the Chinese labor force and its productivity success must address the needs of all of its workforce and particularly the young. In addition to the aging population, gender-related challenges and gender inequality in the workforce are a fact of life in the Chinese industrial and labor relation system. The Chinese labor market should design policies to promote gender equality now and in the long run.
Another factor that needs to be seriously addressed is the role of state-owned enterprises in the economic development of the country. China’s financial support to state-owned enterprises is inefficient and has led to distortions in the internal Chinese market hindering innovation. Chinese economic policies must address all the above factors in addition to a clear understanding that economic size matters. The U.S. is the leading global economy with the largest GDP. The U.S. population is 342 million compared to China’s 1.3 billion individuals. Thus, China should have a place in the global economy commensurate with China’s share of the global population. The above factors and variables of size, GDP, population challenges, and inefficient state-owned enterprises will all come to play if China is going to grow to challenge the U.S. economy. The resilient and robust U.S. economy has a better foundation and has over time implemented more effective and efficient policies that foster U.S. innovation and U.S. technological prowess. Moreover, U.S. multilateral engagement and linkages with other Asian economies such as India, Japan, and Australia among others, are producing a better framework for multilateral and diplomatic ties across Asia.
The success of the Chinese economy and its ability to grow was built upon a centrally planned framework as well as borrowed Western economic models. This framework allowed China to grow to become the factory of this planet. However, the lack of economic efficiencies in its state-owned enterprises and the Chinese government’s focus on allowing shadow banking to grow may create obstacles that the Chinese economy cannot overcome. Moreover, the Chinese economy lacks a focus on consumer-based income growth. For China to return to sustainable economic growth, it must rely less on state-owned enterprises and bring consumer confidence to allow for a new growth model where both consumers and producers are equally important.
In conclusion, it must be stated that stable economic relations between China and the U.S. are important to both countries, global investment, and global trade. The U.S.-China bilateral trade is large estimated at $700B. A growing Chinese economy that adheres to transparency and has a level playing field that is subject to international rules is desirable. Among challenging competitors, one is likely to encounter disagreements and fights. To noncompetitors, one can be indifferent. The United States, the leading global economy of over $23T, cannot be indifferent about dealing with China, the second-largest global economy at $13T. Easing tensions, resolving conflicts, and finding common grounds are in the best interest of both countries and the global economy.
The Journal of Asia-Pacific Business has a seemingly very specific scope, but the region includes such a wonderful variety and our articles for this issue reflect that as well. Our articles for this issue are as follows: Our first article is a round-table discussion with the former U.S. Congressman for Ohio, Mr. Tim Ryan, entitled: “Zoetic Global, a U.S. Centric Firm with a Global Reach.” The second article, “Will China Replace America in the Gulf Region? Saudi Chinese Relations and Potential Obstacles” was written by Hussain Abdul-Hussain, a Research Fellow at the Foundation for the Defense of Democracies. Our third article is a collaborative effort by Adelina Gnanlet, at California State University, Christopher McDermott of Rensselaer Polytechnic Institute, NY, and Muge Yayla-Kullu, University of Central Florida, entitled: “Impact of Workforce Flexibility on Operating Costs: Empirical Evidence from Healthcare.” Our fourth article, “Insta-Influencers’ Endorsement Effect on Consumers’ Purchase Intention: Parallel Mediation Role of Brand Credibility and Brand Attitude” is an analytic work by Alaleh Dadvari of National Central University, Taiwan, Shallyn Aprillia Shira of California State University, and Massoud Moslehpour of Asia University, Taiwan. Finally, the last article is an excellent conceptual and analytical work regarding Entrepreneurship and Economics by Norris Krueger, a Senior Entrepreneurship Developer of Boise Idaho, entitled: From Keynes’ “Animal Spirits” to Human Spirits? : Passion as The Missing Link(s) in Entrepreneurial Intentions.
It is our hope that one or more of these articles will inspire and augment your research interest in the Asia-Pacific economies. We are as always, extremely grateful for our reviewers and referees without whom all of the scholars in our fields would be left adrift. Finally, we value our readers for their continued support of our efforts.
Thank you!