Fortress America

Is There Anything Real About the CCP’s ‘Great’ China?

Gregory Copley is president of the Washington- based International Strategic Studies Association and editor-in-chief of the online journal Defense & Foreign Affairs Strategic Policy. Born in Australia, he is a Member of the Order of Australia, an entrepreneur, a writer, a government adviser, and a defense publication editor. He writes:

“Every government in the world is reeling from the seismic shocks of President Donald Trump’s so-called tariff war, perhaps failing to see that the campaign by Trump to force an end to tariffs worldwide is separate from his use of tariffs to finally end the dominance—perhaps the existence—of the Chinese Communist Party (CCP).

Despite his joke that he loves tariffs, Trump may become the United States’ first “ free trader,” freeing the U. S. economy from tariffs and protectionism and competing more in the global trading market by incentivizing manufacturing in the United States.

Through his so-called grenade negotiating tactics, Trump has begun bargaining to see all tariffs against the United States dropped in return for reciprocal dismantling of tariffs against compliant states.

But the People’s Republic of China ( PRC) differs from the United States. In any event, the CCP has put itself into a negotiating position in which it cannot comply with the Trump administration’s “zero tariff” demand or lose prestige. However, the administration knows that the CCP has been at its weakest point since 1949, and Trump seems determined to deal it a death blow during his term in office.

Even U. S. allies don’t grasp this and still believe the CCP’s bombast. As a result, “the West,” at a critical time in a transforming global environment, is failing at leadership levels to grasp how best to deal with the Chinese regime because it is still captive of Beijing-propagated myths of PRC strengths.

How the ruling CCP is handled at this stage will determine the likelihood of imminent conflict ( between the PRC and Taiwan, or elsewhere), and the strategic framework going forward. Will “tomorrow’s China” remain the great adversary of the West or the United States? Or will today’s “mythically monolithic” China break apart?

Fundamental hallmarks of strategic success have always included self-confidence, self-knowledge, and decisiveness, among other assets, as well as the critical ability to realistically assess the capabilities and intentions of friends and adversaries and their respective willpower.

Equally, it is fair to say that most of us as individuals and as societies do not deeply understand or assess ourselves, let alone comprehend allies and enemies within realistic frameworks. This was true during the Cold War, when it was clear that the USSR and the West made strategic assessments of each other in varying forms of blindness. It is even more the case today that the West—such as it is—in its assessments of the CCP and its subordinate body, the PRC, fails to really grasp the true nature of the CCP/PRC. And vice-versa.

But to be fair, the CCP spends more time attempting to understand “the West,” particularly the United States, than the West/United States does trying to understand the CCP/ PRC. Essentially, senior Western policymakers and military officials generally accept the CCP’s presentation of the PRC, even to the extent of calling the PRC “China,” without qualification as to its legitimacy as a “nation-state” and historical successor to the Republic of China or Imperial China.

The United States, in particular, did the same thing after World War I, thinking of the Soviet Union as “Russia” and, after the collapse of the USSR, thinking of post-Soviet Russia as the Soviet Union. This has led to the profound Eurasian conflicts of today.

Many people are slow to recognize change and prefer to cling to historical symbology and continuity, akin to accusing generals of “ fighting the last war, not the next one.” The result is that the reality of today’s PRC is not even acknowledged by Western decisionmakers, who prefer to remain paralyzed by the concept of an overwhelmingly powerful mainland Chinese state.

Western policymakers are not acknowledging several realities. Some of these are because it serves many interests to raise the specter of an imminently threatening, overwhelming adversary, distracting electorates from other issues. But it is worth investigating several trends that are now beyond question:

• CCP leader Xi Jinping has been outmaneuvered by his CCP opponents and is being systematically stripped of his access to the levers of power.

This situation has put the Party and country in a period of paralysis. The question, as always, is who would succeed him? This is a more uncertain process today because of how Xi attempted to clear the field of all possible other candidates. In the meantime, the entire CCP apparatus is focused on internal survival.

• The PRC’s economy is now in turmoil, with rising debt, growing poverty and starvation, massive public discontent with the Party, and almost no funds to fuel its global ambitions, let alone the signature Belt and Road Initiative of the past decade. China has become reliant on foreign-supplied food, and its water supply is polluted. The recent urbanization and subsequent housing boom and crash have left society dislocated.

• The People’s Liberation Army, made up of all of the CCP’s military (bearing in mind that this is a Party military, not a national military), is fundamentally dysfunctional and lacking in sufficient warfighting capability because of dislocated command and control, technological unreliability and failures, and outright divisions of loyalty among key officers.

This does not mean that the PLA is not dangerous, but it is not consistently loyal to Xi and not loyal to the concept of war with Taiwan (or any combination of neighbors). All of this is happening when much of “the West” is itself in disarray and social paralysis, and distracted by attempts among leadership groups in separate states to retain power in a world of change.

So the question remains: Who will deal with communist China? Perhaps no one. Who will seek advantage in a world in chaos? Is that the goal of the new Trump administration: to abandon the failed alliances and multinational governance mechanisms to build an overwhelming “new USA”?

----------------------------------------------------------

Deflation: A Fundamental Sign of China’s Economic Decline and a Contributor to It

Milton Ezrati is a contributing editor at The National Interest, an affiliate of the Center for the Study of Human Capital at the University at Buffalo (SUNY), and chief economist for Vested, a New York based communications firm. Before joining Vested, he served as chief market strategist and economist for Lord, Abbett & Co. He also writes frequently for City Journal and blogs regularly for Forbes. He writes:

“Deflationary forces seem to be gaining momentum in China. Factories, excessively built up by Beijing’s planners, continue to churn out more products than either Chinese consumers or foreign buyers want. Managements—whether in private firms or state- owned enterprises— continue to cut prices to unload their bloated inventories. Their profits have suffered accordingly.

These pressures have persisted for so long now that people have come to expect price cutting. Such a psychology, once embedded, will have adverse economic consequences of its own.

No matter how one parses the statistics, they look bad. Consumer prices have not fallen, largely because of increases in services. But even then, the upward movement is all but imperceptible. The last report from Beijing’s Ministry of Statistics shows that, in February, consumer prices were about flat with year- ago levels.

Meanwhile, goods at the producer level— what the ministry refers to as the “factory door”—were, in March, 2.5 percent below their year- ago level. They have been in decline since October 2022. China’s gross domestic product (GDP) deflator, the broadest price gauge in the economy, has declined for six consecutive quarters.

This problem has at least three roots. Top of the list is the dramatic slowdown in the growth of exports over the past couple of years. Much has been made about the tariffs that President Donald Trump is putting in place, and they will become a significant contributor to this economic malaise. Still, they are only part of a larger picture.

The Biden administration, for instance, although it criticized the 2018 and 2019 Trump tariffs going into the 2020 presidential election campaign, nonetheless kept them in place once in office and added a 100 percent tariff on Chinese-made electric vehicles ( EVs), parts, and batteries.

The European Union has also placed tariffs on Chinese-made EVs. Nor is the export shortfall purely a result of actions by Western governments. Because Beijing’s zero-COVID policies interfered with production and deliveries for years after the COVID-19 pandemic ended, foreign buyers have, for some time, actively sought to diversify supply chains away from China.

To be sure, China, of late, has seen a sharp rise in export demand. Several media outlets have made much of this jump, claiming that perhaps it is a sign of recovery. This is a false signal. Foreign buyers, anticipating a rise in the cost of Chinese goods because of the Trump tariffs, have stepped up immediate purchases in an effort to build a less expensive inventory for sale after the tariffs take effect. Aside from such immediate effects, the imposition of tariffs promises to accelerate the diversification of sourcing away from China and impede Chinese export growth still more than in the past.

While the slow growth of exports has contributed to deflationary pressures, so also has a paucity of domestic demand. China’s long-running property crisis lies behind this sad reality. Not only has the financial failures of several property developers retarded advances in China’s important construction sector, but the crisis has spread to the Chinese consumer by depressing real estate values and hence the net worth of millions of Chinese households.

While Chinese people at just about every income level save to rebuild their household wealth, they remain highly reluctant to spend, leaving the steady output of China’s factories to pile up on retail shelves. 

If this were not enough, Beijing, in 2023, set off on misguided policies that have exacerbated the situation. To make up for the insufficient export growth, authorities decided to increase demand at home by pouring public funds into an expansion of production capacities in select industries.

They chose what they saw as industries of the future—technology, EVs, biomedical, and the like—but all this did was raise the output of products that in the present neither domestic nor foreign buyers wanted. And since much of this additional productive capacity is still coming online, coming quarters will likely see more deflationary pressure as managers try to sell off the excess inventory.

A fundamental danger also lies in this deflationary situation. Should foreign and domestic buyers come to see wholesale price deflation as normal, they will delay purchasing on the expectation that tomorrow’s prices will be more attractive than today’s. These delays will then contribute to the demand shortfall and put additional downward pressure on product prices, creating something of a self-fulfilling prophecy.

This is what happened in Japan in the 1990s and the first two decades of this century. It made the recovery of a forward economic momentum that much more difficult than it otherwise would have been. Beijing already faces enough trouble getting its economy back on track. It does not need this, but deflation has become a sad reality.”

Next time: U.S. Must Prevent China and Russia From Attacking America From Space