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China’s recent developments on various fragile matters managed to make the media’s front page once again. China in our opinion remains a very interesting and crucial segment for the overall global economic and political system. Its developments have the potential of greatly influencing the world from many perspectives, thus this report may prove useful from a more macro-economic stand point. Together will overview some of the most significant reasons we believe China will continue to be monitored by analysts.
China’s nuclear program set to expand
Not to our surprise, a number of analysts have recently emphasized how China’s military advancement can help support its political ambitions in the following years. The Chinese People’s Liberation Army is expanding rapidly across all domains land, sea, air, space, cyber and nuclear making other global powers unable to ignore the situation. Chinese nuclear warheads have already increased in the past 5 years and are forecasted to increase substantially by the end of the current decade. In this case the US and Russia which also keep a wide range of nuclear weapons, are constantly monitoring the expanding red giant, as the Mainland is sometimes referred too. Political and military specialists from the US have taken notice of China’s militant capabilities and are investing more money to uplift their own umbrella of military tools. In the past months the Chinese military conducted two hypersonic weapons tests. Even though the US is also developing similar weapons and is possibly ahead of China on the subject currently, pressure to upgrade their system is building up. Some of the technologies associated to its hypersonic weapon tests like missile gliding, are a new feature of these weapons and according to US sources can outdo US radars making them more difficult to counter. This is evidence that China’s military expansion can create massive distraction if it chooses to engage in battle. The step forward in nuclear missile technology makes one wonder what the real intentions behind these technological developments are. Some analysts argue that the Chinese are keeping their eyes firmly on Taiwan, as they would like to control its activities for their own benefits. This can also be understood as imposing military control in the area. On another note analysts argue that with the Chinese military expanding and upgrading, the US will think twice before threatening or even engaging in war with them. At the same time this is also sending a clear message to the world that China should be considered not only a great power in terms of business and trade, but also a formidable army with massive technological weaponry assets. We would like to clear that we are not accusing China in this report. In our opinion and once again, China may not be heading the list of nuclear weapons at the moment but it has shown signs it could become the leader in later years. Thus the main idea here is that several militant leading countries of the world are increasing or upgrading the nuclear arsenal in their possession, while at the same time they engage in talks for a greener environment.
International Trade
In the past days, Chinese officials where emphatic with comments criticizing the EU over its new trade changes. Beijing was intense in its language as the EU has seemingly setup regulatory trade hurdles to Chinese but also other businesses. Yet the EU seemed determined to make substantial changes on trade, by using global trade rules in order to improve circumstances related to its trade policy and possibly resolve some obstacles that had cost it significant amounts of money in the past. This is not only a change in rules but also an introduction of fresh legal instruments carefully intended to produce the required results. In this case the Chinese and the other countries exporting and importing goods from and to the EU, will most probably have to adapt to new circumstances. Of course the frustration from the Chinese side is evident not only as they claim it could endanger supply chain matters that are already restrained but they can also slow down the progress to overcome the pandemic’s economic disruption. Supply chain issues especially in terms of semiconductors have been causing enormous problems on a global scale and are expected to follow us well into the next year. China may also be facing challenges due to environmental reasons. After the most recent G20 meeting which was dedicated to environmental matters but also the Glasgow Climate Pact that was signed recently, China is now under a lot of pressure to cut down on CO2 emissions with less fossil fuel usage. China may also be disturbed by the recent deal between the US and the EU on aluminum and steel that once again could be aimed at avoiding countries’ with high carbon emission releases. Finally, Zhang Ming the Chinese ambassador to the EU, noted that the new regulations can weaken global trade and support inflationary pressures.
China’s economic performance in October remains elevated
October has been a solid month for the economic performance of the Chinese Mainland. Most of the economic data for the month has been released in November, were both the Caixin Services and Manufacturing figures for October moved higher compared to previous month’s readings. Manufacturing jumped 0.6 but remained nearby 50 implying the sector has room to improve while Services gained 0.4 and remained at 53.8. Trade circumstances were also improved as the trade surplus rose substantially from $66.76B to $84.54B with exports increasing and imports being on the slowdown. On the other hand, yearly and monthly Chinese Inflation data were also on the rise with releases being at 1.5% and 0.7% accordingly. Today the 15 of November, the Industrial Output rate was both higher than previous and the expected rate being at 3.5%, while the Retail Sales rate overcame expectations to drop and instead moved substantially higher at 4.9%. So far, the readings for October seem to support the notion that economic circumstances may be improving further even though in our opinion Manufacturing in China could have been higher than the current 50.6. This reading implies some weakness compared to the other readings suggested above. In this case it would be useful to mention that the specific sector may have been impacted by the energy crunch the country faced previously.
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