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Integration along the North–South Axis: Opportunities for Coupling

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We build too many walls and not enough bridges.Isaac Newton

Global economy is currently going through a period of rising integration, with the new platforms emerging that assume transcontinental scale, becoming the principal source of global markets opening up. However, in spite of the positive effects that such new platforms have in store for the openness of global economy, this process also entails intensifying competition between and polarization of these blocs along the North–South axis. In 2022, this opposition was increasingly noted between BRICS and G7, the leading blocs of the Global South and the Global North. Amid these conditions, it is very important to design mechanisms for interaction and cooperation between platforms representing developed and developing nations—already at the early formative stages of large-scale blocs.

Growing North–South competition

For developed nations, coupling the platforms of the Global North with those of the Global South is not so much a matter of assisting the developing world—it is more a matter of maintaining and stepping up the pace of their own economic growth in competition with the Global South since “catching-up development” of developing countries helps them grow faster than developed nations. The principal potential for growth of the global economy rests with the developing world. Moreover, these countries harbor the greatest potential for reducing tariff barriers as part of forming their integration platforms. This prompts increasing competition for platforms in the most dynamic regions of the developing world, as is exemplified by the exacerbating competition between the U.S. and China in Asia-Pacific.

The nations of ASEAN make the acute competition between Beijing and Washington particularly obvious. This regional bloc exhibits one of the best dynamics, both in its pace of economic growth and in building a ramified network of economic alliances in global economy. Besides, ASEAN is a hub of innovations and new integration areas—largely, due to economic agreements on digital economy, with Singapore as the acknowledged leader. With ASEAN states increasingly involved in economic cooperation both with developed nations (such as interactions along the ASEAN-EU axis) and developing economies (Cambodia as an ASEAN representative taking part in the 2022 BRICS+ summit), this regional integration may become the pivotal factor in coupling integration projects of the North and the South.

At the same time, we should note that the acute North–South competition could require certain consistency on the part of developing countries in their strategy of forming integration platforms. So far, integration in the developing world is significantly fragmented as compared to similar processes across the developed nations. “Deficiency of integration” is particularly noticeable in Eurasia, where several states remain outside the perimeter of key regional integration blocs or international organizations, such as the WTO. Given this, developing countries should primarily gear up for building a common platform within the Global South, achieving this over the next few years. The 2022 BRICS+ summit held as part of China’s BRICS presidency became an important step to attain this goal. This summit was attended by representatives of the largest integrations of the developing world, which creates premises for further steps toward a broader cooperation platform.

A common platform for countries of the Global South will significantly increase capabilities of developing countries for building more active and equal platforms of interaction with developed nations. The weightier the trade alliance formed by developing nations, the more countries of the Global North will lose in consequence of trade restrictions against the Global South. With little progress attained by the developing world toward such common platforms, developed nations will most likely interact with individual regions and blocs of the developing world on the basis of conditionality. In this case, developing nations that are building a number of global alliances should prioritize their own platforms while building interactions with integrations of the developed nations later on.

While following a certain sequence in building economic alliances, developing countries may significantly increase the openness of their regional blocs—both for other developing nations and for integrations formed by developed economies. Simultaneously, integration blocs of the Global North should be as open to mutual connections as platforms of the Global South. So far, such a connection is in evidence; on the contrary, we stand witness to growing polarization and competition between the platforms established. For instance, such platforms as Global Gateway or G7’s Build Back Better World (B3W) are positioned as competitors of the Belt and Road Initiative. After the G7 summit of 2022, leading developed nations announced they would be earmarking up to USD 600 bn. to implement connection projects in developing countries. This funding is less than the existing funding in the Belt and Road Initiative, and it does not stipulate mechanisms for coupling with the relevant initiatives of the Global South.

New formats: R20 and BRICS++

Importantly, integration platforms that incorporate both developed and developing states are also emerging amid growing global economic competition for integration platforms. Such groups may serve as bridges between the North and the South. This primarily applies to such largest integration groups as the Regional Comprehensive Economic Partnership (RCEP) and such forums as G20. Yet, for these venues to play their role in connecting the platforms of the North and the South, they need additional mechanisms of inclusivity. For the RCEP, these could be provisions on admitting new states and on interacting with other regional groups.

G20 could achieve greater inclusivity through a platform for interactions between regional groups, of which G20 states are members. The Valdai Club proposed this format in 2018, dubbing it R20 (the Regional 20). With a platform for interaction between regional blocs in place, it would be possible to significantly expand cooperation between the global economic heavyweights and smaller economies, which are regional partners of the largest states. Moreover, extending G20’s format of interaction to the regional partners of the group would overcome one of its key problems and limitations—namely, insufficient representation and lack of legitimacy in empowering all constituent nations of the global economy. It is also important that the R20 format would allow for a more efficient coordination of global and regional anti-crisis steps, providing a better venue for interactions between the regional projects of the North and the South.

On the other hand, the BRICS+ platform, which is currently formed by the Global South, does not so far envisage mechanisms for interacting and connecting with developed states. If BRICS+ opts to develop along the lines of admitting only developing G20 states to its core, that will not provide an impetus for developing the BRICS+ format toward the required inclusivity and will not be conducive to meaningful connections between the platforms of the North and the South. If BRICS+ gears its development toward G20, this trend may also undermine the focus of developing countries on their own agenda and on their own platforms of integration. The very G20 platform, despite several achievements in advancing the global agenda, is still far from being properly inclusive and efficient in coordinating the anti-crisis steps taken by the global economy’s largest states.

A more promising course apparently lies in creating a special format for interactions between developed and developing states within BRICS++. Such a format could include interactions between BRICS+ and individual developed states or developed states’ regional groups, including the EU or EFTA. The perimeter of the BRICS++ format could also include joint blocs and forums of the North and the South, for instance, the RCEP. Additionally, along with regional integration blocs, BRICS++ could also include North–South interactions within regional and global development institutions. Ultimately, BRICS++ could acquire a global scale by connecting projects of developed and developing states and becoming a platform for a new stage in globalizing the world economy. This platform could become an important addition to global institutions such as the IMF and the World Bank and such forums as G20 where developed states thus far largely play a dominant role.

India’s and Africa’s key role

India and South Africa may play an important role in developing the North–South ties and in the evolution of BRICS+ toward greater openness and inclusivity. Representing the developing world in such projects as the emerging system of economic cooperation in the Indo-Pacific, India may also become a key factor in connecting the platforms of the North and the South. India could also be instrumental to security dialog between the nations of BRICS and the developed states that are members of the QUAD

As for BRICS+, this format could give India an opportunity to advance its own platforms and projects, including North–South transportation corridor projects in addition to China’s initiatives aligned along the West–East axis. For India, BRICS+ could serve as an instrument of influencing the further development of BRICS (including China’s) ties with other states of the Global South. Without being actively involved in shaping the development agenda of BRICS+, India loses an important tool for advancing its national interests in building common platforms of the Global South. In this context, it is important that, instead of abandoning BRICS+ as such, India should formulate its own concept and vision of this platform.

India could also make interactions within BRICS+ more pragmatic economic affairs by developing cooperation between BRICS New Development Bank and other regional development institutions (NDB+), and the same applies to expanding the BRICS Contingent Reserve Arrangement’s (CRA+) mandate and enhancing its role. BRICS++ may also carry major opportunities for India that could use its accumulated political capital in its relations with the leading developed states with a view to connecting developed states’ key projects (B3W, Global Gateway) and the global South.

Africa can play a no less important role in BRICS+ and in connecting the platforms of the North and the South. Among all the pan-continental blocs of the developing world, Africa was the first to create a continent-wide free trade area, and this platform can play a key role in the “integration of integrations” with developing states of Asia and Latin America. Connecting such integration projects as the African Union (Africa), the Community of Latin American and Caribbean States (CELAC), and the expanded Shanghai Cooperation Organization (SCO+) could serve as the foundation of a common platform of the Global South. Here, Africa is the key link in the “integration of integrations” in the Global South since it already has a number of agreements with other regional blocs in the developing world. Particularly, the African Union and the Caribbean Community (CARICOM) held their first summit in September 2021.

Given that Africa exhibits a high concentration of such global issues as the food problem, the energy problem, and the debt problem, Africa could also become the region where joint projects run by the development institutions of the North and the South overlap. Transportation connection projects, developing the “green agenda” element of sustainable development, and combating pandemics could become important areas of interaction between development institutions of developed and developing countries. The African Union can also play a more significant role in transforming the global economic architecture in the format of interacting regional integration blocs. In this regard, close attention should be paid to increasing the African Union’s representation in global international organizations along with the established representation of leading regional blocs formed by developed states. As Africa’s key regional platform, the AU should become a systemic participant in G20 discussions along with the EU.

In July 2022, the African Union marks its 20th anniversary. Over this time, much has been achieved in advancing the interests of African states in international forums and multilateral economic organizations. The African Union, of all the Global South regions, achieved significant results in consolidating the pan-continental agenda and in building interactions with regional blocs formed by developed states (primarily the EU) and by the developing world. In 2023, South Africa will assume presidency in BRICS, and in 2025, the chairmanship in G20. It is possible that in the nearest future, it is Africa and the African Union that will be able to play the key role in transforming the global agenda of the North and the South along the lines of resolving global problems and building greater interactions between developed and developing states.

Conclusions

Today, there is both a need and a possibility to couple integrations of the North and the South. However, it requires new mechanisms of cooperation within global forums such as G20, including cooperation between regional integration blocs of the North and the South. Besides, it is necessary to transform the largest regional blocs along the lines of greater openness to “integration of integrations” and the possibility of connections with other regional blocs. Countries of the Global South should be more active in creating common platforms for economic cooperation. In the last few years, developing countries’ prerequisites for creating such mega-platforms have significantly improved. The developing world inaugurating a common integration project will, in turn, see more favorable conditions for constructive cooperation between—and connection of—the platforms of developed and developing states. As of yet, integrations of the Global South are far from the degree of connectedness and structuredness typical of developed states’ integration projects. As the “integration gap” in the global South is overcome, this space will form conditions for stable and balanced connections between platforms of developed and developing states. The African Union and India (by being more actively involved in shaping the agenda of BRICS+ and BRICS++) may play the key role in these processes.

1. Andrey Kortunov analyzed the prospects of building security interactions between BRICS states: https://news.cgtn.com/news/2022-06-23/Can-BRICS-make-a-contribution-to-international-security–1b43c79r4U8/index.html

From our partner RIAC

Head of the analytical Department of Sberbank's corporate and investment business (Sberbank CIB) — Sberbank Investment Research, RIAC Member

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Economy

The Assembly Lines of Grand Eurasia

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The changing landscape of the global economy in recent years is increasingly characterized by a more active role of developing economies in building their own platforms for economic cooperation. In the process of assembling these platforms for the Global South one of the key issues is the algorithm of the aggregation process in Eurasia — the two other continents of the Global South already have their pan-continental platforms, namely the African Union and the African Continental Free Trade Area (AfCFTA) in Africa as well as CELAC in Latin America. In case a comprehensive pan-Eurasian platform for developing economies were to be formed this would open the gateway to the completion of the assembly of platforms that span the entire expanse of the Global South.

As is the case with the expansion of the BRICS grouping, the building of the Grand Eurasia as a platform for the region’s developing economies can proceed either along the formation of a core and its gradual expansion or via an “integration of integrations” route, whereby all of the main regional integration blocs of the Global South in Eurasia are brought together. There is also the possibility that both these tracks could be pursued simultaneously.

In the scenario involving the formation of the Eurasian core for the Global South, the main question is its composition and the resulting scenarios of further expansion. One possible modality would be the RIC (Russia-China-India) serving as a core, with further additions focusing on the largest Eurasian economies such as the G20 countries from Eurasia — Saudi Arabia, Indonesia or Turkey. This route would clearly result in the assembly process being slow and lacking connectivity to other smaller developing economies of the continent.

Another possible format for the Eurasian core could be the Shanghai Cooperation Organization (SCO) or its more extended version of SCO+. Such a core would have the benefit of comprising all of the largest economies in Eurasia (Russia, China, India), while leaving open the possibility of smaller economies joining this Eurasian “circle of friends”. Despite the more inclusive approach to forming the Eurasian platform, the country-by-country approach to expansion would still leave the assembly process too slow and ad hoc.

The only real way to expedite the construction of Grand Eurasia is via the “integration of integrations” scenario that may involve the aggregation of Eurasia’s leading regional integration arrangements (and their developing institutions) represented by developing economies.

Such a platform of developing economies across the expanse of Eurasia can bring together such regional arrangements as: South Asian Association for regional Cooperation (SAARC), ASEAN, Gulf Cooperation Council (GCC), Eurasian Economic Union (EAEU) as well as the Shanghai Cooperation Organization (SCO). In the case of SCO there may be the possibility to resort to an extended SCO+ format which would involve the addition to SCO of those Eurasian economies that are outside of the main regional integration arrangements. The resulting SAGES platform may represent the main assembly line for economic cooperation among the Eurasian developing economies that is based on the mechanism of “integration of integrations”.

Still another possibility would be an assembly process modelled on the UN, which would involve the creation of a forum for all the developing economies of Eurasia with a Eurasian Security Council represented by the largest economies of the continent (G20 members (China, India, Russia, Saudi Arabia, Indonesia, Turkey) as well as possibly Iran). Another possibility in this UN-type scenario is the SAGES Economic Council that brings together the main regional blocs of Eurasia as a more inclusive version of the UN Security Council.

In the end, there are multiple possible trajectories for the assembly process of the Grand Eurasia — the most attractive appears to be the “integration of integrations” track as it appears to be more expeditious and inclusive. At the same time, there are also risks and challenges involving this scenario as the domain of “integration of integrations” remains largely unexplored across the terrain of the Global South. In this respect, there may be important synergies in the innovation process of “integration of integrations” along the Eurasia track as well as the BRICS+ route that represents a global rather than regional platform for the cooperation across regional integration arrangements. The Global South is approaching a crucial point in its economic development, whereby a common platform for cooperation across all developing economies may represent the most important gateway to economic modernization in decades.

From our partner RIAC

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Policy Support Indispensable for China’s Economic and Financial Recovery

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According to the latest statistics from the People’s Bank of China (PBoC), monetary and financial data showed a return to growth in June. At the end of June, the balance of broad money (M2) was RMB 258.15 trillion, a year-on-year increase of 11.4%, and the growth rate was 0.3 and 2.8 percentage points higher than that at the end of last month and the same period of the previous year respectively. Meanwhile, the balance of narrow money (M1) was RMB 67.44 trillion, a year-on-year increase of 5.8%, where the growth rate was 1.2 and 0.3 percentage points higher than the end of last month and the same period of the previous year respectively. The balance of currency (M0) in circulation was RMB 9.6 trillion, a year-on-year increase of 13.8%.

In the first half of the year, the net cash investment was RMB 518.6 billion. At the end of June, the stock of social financing was RMB 334.27 trillion, up 10.8% year-on-year, and the growth rate was 0.3 percentage points higher than that in May, though still lower than the 11% growth rate in the same period last year. The growth rates of the M2, M1 and social financing scales have all shown the tendency of increase simultaneously. Researchers at ANBOUND believe that this reflects that driven by the intensification of macroeconomic policies, the overall financial and economic situations are showing an upward recovery trend.

Figure: Monthly Monetary & Social Financing Growth Rates and Price Level Change (in percentage)

Source: People’s Bank of China & National Bureau of Statistics, chart plotted by ANBOUND

However, in terms of credit growth, which accounts for the main part of social financing and currency, the balance of RMB loans at the end of the month was RMB 206.35 trillion, a rise of 11.2% year-on-year, and the growth rate was 0.2 percentage points higher than that at the end of last month and 1.1 percentage points lower than the same period last year. In June, RMB loans rose by RMB 2.81 trillion, being a year-on-year increase of RMB 686.7 billion. This shows that despite the substantial growth of RMB credit in June and that the overall recovery has been achieved, the upward momentum remains insufficient. Continued support from macro policies will still be needed to enable China’s finance and economy to recover comprehensively. In addition, at the end of June, the balance of RMB deposits was RMB 251.05 trillion, a year-on-year increase of 10.8%, and the growth rate was 0.3 and 1.6 percentage points higher than that at the end of the previous month and the same period of the previous year respectively. In June, RMB deposits increased by RMB 4.83 trillion, a year-on-year increase of RMB 974.1 billion. The rapid growth of deposits is consistent with the previous survey results of the Chinese central bank, indicating that under the continuous impact of the COVID-19 pandemic, the market still lacks confidence in consumption and investment, which affects credit demand to a certain extent.

On the other hand, the stock of social financing at the end of June was RMB 334.27 trillion, a year-on-year increase of 10.8%. Among them, the balance of RMB loans issued to the real economy was RMB 205.09 trillion, a year-on-year increase of 11.1%. The balance of foreign currency loans issued to the real economy was RMB 2.33 trillion, a year-on-year increase of 0.5%. Entrusted loans decreased by 0.5% year-on-year, trust loans fell by 29.6% year-on-year, and undiscounted bank acceptances fell by 19.2% year-on-year. The corporate bond balance was RMB 31.48 trillion, an increase of 10.1% year-on-year. The government bond balance was RMB 57.72 trillion, up 19% year-on-year. The domestic stock balance of non-financial enterprises was RMB 9.96 trillion, a year-on-year increase of 14%.

The cumulative increment of social financing in the first half of 2022 was RMB 21 trillion, which was RMB 3.2 trillion more than the same period last year. Among them, RMB loans issued to the real economy increased by RMB 13.58 trillion, a year-on-year increase of RMB 632.9 billion. Foreign currency loans issued to the real economy increased by RMB 45.8 billion, a year-on-year decrease of RMB 182.3 billion. The entrusted loans decreased by RMB 5.4 billion, which was a year-on-year decrease of RMB 109.1 billion; while trust loans decreased by RMB 375.2 billion, making it a year-on-year decrease of RMB 348.7 billion. Undiscounted bank acceptance bills decreased by RMB 176.8 billion, a year-on-year decrease of RMB 171.4 billion. Corporate bond net financing was RMB 1.95 trillion, a year-on-year increase of RMB 391.3 billion. The net financing of government bonds was RMB 4.65 trillion, an increase of RMB 2.2 trillion year-on-year. Additionally, the stock financing of non-financial enterprises in the country was RMB 502.8 billion, an increase of RMB 7.3 billion year-on-year.

These data changes reflect that the scale of social financing in May and June has increased significantly under the circumstance that monetary policy easing has intensified since the second quarter. The increase in the scale of social financing in June reached RMB 5.17 trillion, an increase of RMB 1.47 trillion year-on-year. The stock of social financing has basically filled the gap left by the sharp decline in social financing in March and April, and the overall social financing has seen a recovery to the long-term trend. In realizing the incremental recovery of the social financing scale, it should be pointed out that government bond financing has played a major role, and its incremental growth has reached RMB 2.2 trillion. In fact, this was essentially driven by the massive issuance of local government bonds in May and June. It has been estimated that in June alone, the incremental scale of government bond financing reached RMB 1.6 trillion, which is a significant continuous increase from RMB 1 trillion in May. This has played a major role in the RMB 3.3 trillion increase in the scale of social financing. Furthermore, the decline in non-standard financings such as entrusted loans, trust loans, and bank drafts is due to the substitution effect brought about by credit easing on the one hand, and this is closely related to the effect of the shrinking real estate market on the other hand. In the first half of the year as a whole, the rise of RMB 13.58 trillion in credit to the real economy, which was an increase of RMB 632.9 billion year-on-year, also means that the central bank’s sustained goal of maintaining credit growth has been achieved.

For the growth rate of the social financing scale to be 10.8%, this would signify that China’s timely adjustment of monetary policy in the first half of the year has a positive effect on stabilizing the country’s finance and on promoting stable growth. This may be the basis for the PBoC to emphasize the return to stabilization policy. As far as the second half of the year is concerned, the scale of social financing is still under great pressure to maintain the growth rate. This is especially true when the peak of local bond issuance has passed and the quota has been exhausted. The issuance of government bonds, which played a supporting and bottom-up role for social growth in the first half of the year, will then see a decline in its effect. This, in turn, will increase the reliance on RMB loans or other direct financings for social financing growth. Promoting the growth of bank loans will remain the main task in the future. In other words, China’s macroeconomic policies such as monetary and fiscal policies still need to provide continuous support for economic recovery through total easing and structural adjustment.

Final analysis conclusion:

In June, the growth rate of monetary and social financing in China showed a simultaneous increase, indicating that the overall financial and economic situations of the country are showing a recovery trend. This, all in all, is driven by the intensification of macroeconomic policies. Nonetheless, under the circumstance of the withdrawal of local government bond issuance, there will still be pressure to maintain the continued growth momentum of monetary and social financing in the future. Hence, the ongoing support from macro policies will become indispensable.

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The Real Estate and Banking Crisis in China Is Spreading to Other Aspects of the Chinese Economy

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The continuing real estate and banking crisis in China is starting to spread to the other aspects of the Chinese economy.  With the real estate market in trouble, with many contracted apartments and homes not being finished, and contracted owners refusing to pay on their mortgages until the apartments are finished, the economic consequences of this crisis are starting to leak into the other parts of the Chinese economy.

One of the main pillars of the Chinese economy has been the steel industry.  For decades the Chinese domestic economy has depended on the real estate industry to provide an outlet for the tremendous amount of steel produced by China each year.  For the last two decades the huge amount of construction on skyscrapers, factories, huge apartment complexes, and dwellings have been able to soak up the oversupply of steel produced by the Chinese steel industry.  Steel has also been the feedstock for the manufacture of the budding Chinese auto industry, as well as manufacturing key parts for the autos produced overseas.

A key indicator of the health of the Chinese steel industry has always been China’s purchase of iron ore from overseas.  In the year 2020, at the height of the Covid epidemic, China imported 1.17 billion tons of iron ore.  In 2021 the amount decreased to 1.1 billion tons.  In the first 5 months of 2022 China only imported 447 million tons of iron ore.  This figure is down 5.1 percent from the same period in 2021.  Some of these imports can be attributed to panic buying because of the Russian invasion of Ukraine. 

Li Ganpo, founder and chairman of Hebei Jingye Steel Group, has warned that a third of China’s steel mills could go into bankruptcy this year.  According to a transcript seen by Bloomberg…”The whole sector is losing money and I can’t see a turning point for now…”

Along with the decrease in the manufacture of finished steel products, is the increase in the inventory of finished steel products which increased by 20.5 million tons in a snapshot taken of Chines steel inventory in June 1 2022,to June 10 2022.

Chinese Thoughts on Money

In the West, and throughout most of the world, money is an economic good.  Money in the West is governed by the philosophy of a return on investment which creates more wealth.  Money is used as an intermediation between buyer and seller.  In China, according to the geopolitician Peter Zeihan, money is considered by the CCP as a political good.

According to Mr. Zeihan “Investment decisions not driven by the concept of returns tend to add up. Conservatively, corporate debt in China is about 150% of GDP. That doesn’t count federal government debt, or provincial government debt, or local government debt. Nor does it involve the bond market, or non-standard borrowing such as LendingTree-like person-to-person programs, or shadow financing designed to evade even China’s hyper-lax financial regulatory authorities. It doesn’t even include US dollar-denominated debt that cropped up in those rare moments when Beijing took a few baby steps to address the debt issue and so firms sought funds from outside of China. With that sort of attitude towards capital, it shouldn’t come as much of a surprise that China’s stock markets are in essence gambling dens utterly disconnected from issues of supply and labor and markets and logistics and cashflow (and legality). Simply put, in China, debt levels simply are not perceived as an issue.”

In China, money is a political good, and only has value if it can be used to achieve a political goal. That political good is maximum employment.

The concepts of rate of return or profit margins do not exist in China, and therein lies the danger; eventually the law of supply and demand will win out, and the Chinese economy will have to face a correction. The longer it takes to face this economic correction, the greater damage that the inevitable correction will cause to the Chinese economy.

China is Not Capable of Non-Steady State Economic Growth

Lacking an impartial judiciary system, the Chinese economy is incapable of “Non-Steady State Growth.”  Non-Steady State Growth occurs when a new technology increases production of a good or service which expands the economy at a rapid clip.  Non-Steady State Growth can only occur in a business environment where an impartial judicial system is able to fairly adjudicate contract disputes.  With the heavy hand of the Chinese Communist Party (CCP) interfering in judicial conflicts, and favoring members of the  CCP in contract disputes, this type of constraint inhibits research into new and promising technologies.

This means that the Chinese economy is stuck in Steady-State Growth.  Steady state growth depends on a constant amount of inputs to help the economy grow.  However, at a certain point, inputs do not result in growth as marginal utility becomes saturated and has a zero growth rate.

A Domino Effect Seems to be Forming in the Chinese Economy

A domino effect is defined as “…how one action can have a knock-on effect to related subjects. Knock one domino over, and you don’t just affect the first domino, but all the ones who stand in its path…”

In economics a domino theory can be used to explain how economic weakness, or loss, can spread to other areas of the economy causing a recession or depression.

In the current economic environment in China, the Evergrande implosion has begun to infect other areas of the real estate market in China, which in turn has infected the Chinese banking system.  With Chinese buyers of homes and apartments refusing to make any more mortgage payments until stalled construction on apartment complexes are completed, the economic damage has spread to the Chinese banking system.

In July, thousands of Chinese depositors were protesting the freezing of their money in rural banks in central China.  In the city of Zhengzhou, the protestors had gathered at the main branch of the Chinese central bank demanding their money back.  Officials sent police, disguised in civilian clothes, to break up the demonstration using violence and arresting the protesters.

With construction stalled on numerous unfinished apartment building and complexes, the demand for steel has collapsed, which will inevitably lead to higher unemployment levels for Chinese steel workers, many who are employed by State Owned Enterprises.

With a total of debt that exceeds 300 percent, the Chinese government is sitting on a mountain of debt which many economic analysts say is a disaster waiting to happen.  Some analysts say since the debt is state owned, there is little chance of default. 

With the Chinese real estate market imploding, which is leaking into the Chinese banking system, which in turn is affecting the Chinese steel industry, China faces a hurricane of economic problems all happening at the same time.

It is not inconceivable, that these accumulating crises may lead to a sudden economic collapse of the Chinese economy.

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