This week in Beijing, the National People’s Congress, controlled through the Chinese Communist Party, presented President Xi Jinping’s policy goals for 2024. Premier Li Qiang announced that China would set a GDP expansion target of around 5%. .
China needs technological supremacy over the U. S. and other countries and proposes to increase studies and increase spending to 10 percent. China also aspires to economic self-sufficiency and actively discourages its other citizens from buying foreign goods and brands. One of the stated goals of the National People’s Congress is to increase exports to reach the GDP expansion target of 5 per cent.
Elites also reiterated goals around domestic security, national security, and the reintegration of Taiwan into the People’s Republic of China. Notably, China did not say that it would achieve such reintegration peacefully. It will increase spending on its military by a stated figure of 7% but will more likely spend double that after hidden funding is accounted for. By contrast, U.S. President Joe Biden proposes to increase the American defense budget by only 1%. That is a cut in inflation-adjusted spending.
Still, nonpartisan experts in China remain skeptical about the option of achieving a 5% expansion rate. In particular, critics point to the lack of direct income for families. Critics argue that China cannot continue to rely on capital investment. This policy would inspire Chinese families to consume more, but families are saving because the social safety net is inadequate. Instead of subsidizing the increase in household income, the policy aims to increase sources in the production sector. household intake through a 10:1 ratio.
China is focused on supply, while the real challenge is inadequate domestic demand. China will try to export its excess production. This will inevitably lead to an increase in foreign industrial tensions. Under the Economic Plan 2024, China will continue to wrongly concentrate its economy on state-owned enterprises, which are less effective and entrepreneurial than China’s personal sector.
It is also claimed that Chinese banks are supplying more capital to the already bloated state-owned corporate sector. Every year, state-owned enterprises increase their share of the economy at the expense of the personal sector. This makes the 5% expansion target even more unrealistic.
The policies set forth at the National People’s Congress thus pose challenges for the U.S. The U.S. must increase tariffs when China attempts to dump excess production into the U.S. economy. The U.S. must respond aggressively when China tries to avoid tariffs by shipping excess production through third countries.
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The “Buy China” policy is already hurting Apple, for example. Apple’s smartphone sales in China are down 24%. In response, the U. S. makes it more complicated for Shein and other Chinese low-quality clothing corporations that use the hard labor of slaves to sell their products on the U. S. market. Most importantly, the U. S. will have to maintain its technological supremacy over China.
The US tax code allows accounting for studies and progression prices and capital investments. More fundamentally, the federal deficit must be reduced. High federal deficits raise interest rates and crowd out R
James Rogan is a former U. S. Foreign Service officer who worked in finance and law for 30 years. Write a note.