China must be rescued from economic collapse

Investor confidence shaken

China's investment appeal has dimmed as those seeking safer and more promising opportunities look elsewhere, for example in India and Japan.

The fact that Xi had to step in and intervene further shook investor confidence. He imposed further restrictions, enhanced supervision, and set up a $278bn equity stabilisation fund. 

According to Xavier Hovasse, head of emerging markets equities at French asset management firm Carmignac, to invest in China, one must be "brave, knowledgeable, or crazy."

China — the orchestrator of the Belt and Road Initiative, which sowed its money and technology in more than 150 countries to build roads, airports, seaports, and bridges — went from being an economic giant to now facing the spectre of economic collapse.

Unlike the Chinese stock market, US markets performed remarkably last year, with the S&P 500 reaching record highs and recording a rise of 14%.

For those who have followed the US-China competition in recent years, China's financial crisis could be seen as an opening for Washington, which has always sought to maintain its absolute global hegemony politically, economically, technologically, and militarily.

America, the saviour

At the same time, the US is leading a global effort to try to restructure hundreds of billions of dollars in debt owed to China by poor and developing countries.

It also demands adjustments to China's disproportionate practices with the market economy, such as government subsidies. The US fears excess Chinese industrial production could flood international markets with cheap products.

This could be interpreted as the US exploiting the fact that China is currently under financial pressure, but it could also be an earnest attempt to save Beijing from the clutches of debt.

China accounts for about 40% of global growth. Any slowdown in its economy will undoubtedly have dramatic global repercussions.

US-China cooperation could contribute to world peace, accelerate technological progress, expand markets, and help countries overcome economic crises and combat climate change.

Global repercussions

The most affected by China's economic slowdown are exporters of basic and essential commodities.

China consumes "nearly a fifth of the world's oil; half of its refined copper, nickel, and zinc; and more than three-fifths of its iron ore," according to The Economist.

With the collapse of China's real estate sector, consumption of these materials will inevitably drop. Therefore, China will need "less of these supplies, and this will be a heavy blow to many countries from Zambia to Australia," a "large supplier of coal and iron."

Although Chinese exports to the United States fell by 25% in the first half of 2023 due to US trade restrictions on Beijing, China is a source of revenue for thousands of European and American companies, with sales in China exceeding 10% of their total sales, and ensuing profits exceeding hundreds of billions of dollars.

A great deal of major global companies' revenue comes from China. China accounts for around 20% of Tesla's sales and two-thirds of Qualcomm's sales. 

China has global weight, and its plight won't go unnoticed without an international rally around it.