This week in Beijing, the National People’s Congress, controlled through the Chinese Communist Party, laid out 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 United States and other countries and proposes increasing studies and increasing spending up to 10 percent. China also aspires to economic self-sufficiency and actively discourages its other citizens from purchasing foreign goods and brands. One of the stated objectives of the National People’s Congress is to increase exports to achieve the GDP expansion target of 5%.
The elites also reiterated their goals of internal security, national security, and the reintegration of Taiwan into the People’s Republic of China. Notably, China has not stated that it will carry out such reintegration peacefully. It will increase its military spending by 7%, although it is more likely to spend twice as much after taking into account hidden financing. In contrast, US President Joe Biden proposes increasing the US defense budget by just 1%. This represents inflation-adjusted spending relief.
However, nonpartisan experts in China remain skeptical that a 5% expansion rate can be achieved. Critics highlight, in particular, the lack of direct access to family. Critics say China can no longer rely on capital investment. A proper policy would inspire Chinese families to consume more, but families save because the social safety net is inadequate. Instead of subsidizing the increase in household income, the policy aims to increase the source in the production sector. Production subsidies exceed household income by a ratio of 10:1.
China is focusing on the supply side when the real problem is inadequate domestic demand. China will try to export excess production. That inevitably will lead to increased international trade tensions. Under the 2024 economic plan, China will wrongly continue to focus economic support on state-owned enterprises, which are less efficient and less entrepreneurial than the Chinese private sector.
Chinese banks are also alleged to be supplying more capital to the already bloated state-owned enterprise sector. Every year, public corporations increase their share of the economy at the expense of the personal sector. This makes the 5% expansion target even more unrealistic.
Therefore, the policies outlined in the National People’s Congress pose demanding situations for the United States. The United States will have to increase price lists as China tries to sell its excess production to the American economy. The United States will have to respond aggressively when China tries to avoid price lists by shipping its excess production through third countries.
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The “Buy China” policy is already hurting Apple, for example. Apple smartphone sales in China are down 24%. In response, the United States is making it harder for Shein and other low-quality Chinese clothing corporations that use hard slave labor to sell their products in the American market. Eliminate the $800 tariff exemption. Most importantly, the United States will have to maintain its technological supremacy over China.
The U. S. tax code allows for the accounting of studies and prices of progression and capital investments. The most fundamental thing is to reduce the federal deficit. High federal deficits drive up interest rates and crowd out R&D and overall capital investment.
James Rogan is a former United States Foreign Service officer who worked in finance and law for 30 years. He writes a note.