Can China's economy afford a war with Taiwan? | DW Business Special

welcome to this dw business special where we're asking can china afford a war beijing has been carrying out military exercises ever since a visit by u.s house speaker nancy pelosi to taiwan earlier this month its military vessels now fill the seas surrounding the island which it claims as its own as fears grow that china could attack taiwan we're asking if the chinese economy is strong enough to deal with the consequences well to discuss the various challenges facing beijing at home we're joined by alexander gerlach who is a senior fellow at the carnegie council for ethics in international affairs in new york thanks a lot for joining us alexander there's plenty to talk about because these are interesting times for china watches aren't they thanks for having me yes and indeed they are when i when i lived in taiwan five years ago there was like already like the sky was clouding if that's a word but now i feel we are in the midst of a real turmoil and tempest well we're going to get stuck into all of that and before we do i just want to set out the economic situation for people actually living in china right now so despite decades of consistent economic growth china remains a country with comparatively low gdp per capita so economic output per person when you put it alongside the likes of the us taiwan and germany and what's more the once seemingly unstoppable force of china's economy appears to be losing its momentum the international monetary fund expects china's econ economic growth to steadily slow in the coming years so alexander gerlach has something changed with china are the days of ever accelerating growth and expanding middle class over now well i mean on a general note after decades of growth that's not uncommon to reach a plateau on which it then becomes much more arduous to succeed further and further but that aside also china has had like quite some bad two years in regard to the corona pandemic and the zero corbett policies by the central government by xi jinping have also uh caused a toll on the economy as we know that global supply chains have been shattered if you will you have production sites closed the city of shanghai closed for several weeks so that all has not helped the chinese economy to put it mildly president xi jinping has built so much of his reputation on the lives of chinese people getting better and this expanding middle class but now that that economic growth is starting to slow is that is that going to be a problem for for xi jinping it's it's it's more over it's a it's a bigger problem that of course um is uh adamant for the middle class but it's in the bigger picture the the reason the recent policies by xi jinping that the common prosperity is in his eyes a way of um taking or like amplifying wealth in the country and if you look into china and compared with the united states you will be seeing that inequality is actually almost to the exact figure like this the same so um even though china has a theometrical opposing political existence in the united states they both have embraced a certain specific form of capitalism uh you can call it neoliberal it's definitely not um the social market economy that we have here in germany and that many many western european countries adhere to also like into a certain extent in east asia like korea and and taiwan do so so china has um the jinping sorry danger pink said back in the days let's just get a few people rich and then it's like as we know america trickling down to everybody but that didn't happen so there is like a general problem of how capitalism uh was set up in china and now all the other problems that happen in the real real estate sector crisis the banking crisis also the crisis of credits in the framework of of the road and belt initiatives they all built on on the system that we see in the united states uh already failing like the so-called neoliberal economy so china has to battle like and put out lots of fires here yeah and i'm glad you mentioned the the real estate crisis because one of the biggest headaches for xi jinping and china's ruling communist party is a crisis in the country's property sector it goes well beyond the very well publicized financial woes of developer china evergrand and its 300 billion dollar debt pile chinese property firms have been defaulting on their debts at a rate never seen before meanwhile angry would-be homeowners have been boycotting their mortgage payments they're refusing to hand over any more money for buildings that haven't been built yet well alexander gerlach just help explain how deep the crisis in china's real estate sector really is so in china for the longest time until very recently it was like the investment of the middle class if you have set aside some money to buy apartments also families would just gather the money and just buy someone for the newlywed or whatever so but the difference in china compared for instance to germany is that you could already pay for an apartment that has not been built yet so it was not in even it was maybe in the planning status but you were already starting to pay for it and hence also having to to pay your mortgages that you took from the bank to to pay this apartment so what then happened is that the developers would just use this money for other exploitations like buying more land for more projects that have not yet been assigned so meaning like they did not use the money for the apartments but then like literally when these apartments were built they would just take the money from the people that in the meantime bought apartments that have not yet been built so and it reminds a little of the medev guy in in the financial crisis before the financial crisis you just also like you know took the money of the people trusting in him and whenever somebody asked him for their return he would just like take the money of someone who invested later with him and we see this kind of um unfolding now in china and this unregulated market nearly now has now just like exploded yeah it seems like it was ultimately an unsustainable system wasn't it but how important is the real estate market to china's broader economy because i suspect it's a rather big deal oh it has been like the the bedrock of as i mentioned like as an it was seen as a as a rock-solid investment form and this is also why i mean it's always about trust when you see crisis financial crisis the currency crisis of bond crisis and our real estate crisis also just like for the longest time people just trusted in in the purpose and the revenues and the profit of investing into apartments and that now has been shattered so it has of course an economic cost which other observers are of the same opinion what i read like them there will be a bailout by the government because otherwise the middle class is going to rate uh you know the other the country basically yeah well that's the real estate sector but let's discuss another looming crisis facing the chinese government as well this time relating to its vast belt and road initiative so just five years ago xi jinping described the sprawling program of overseas infrastructure investments as the project of the century it's been it's seen beijing fund transport routes as you can see ports as well almost in every corner of the globe but it started to become an enormous burden just recently to the chinese as borrower countries struggle to make their debt repayments so alexander gerlach has china overstretched itself with the belt and road initiative there has always been like a mild form of criticism because harsh criticism isn't allowed in china but a milestone of criticism saying like and you mentioned this the gdp per capita in this country isn't great uh we don't have schools everywhere we don't have like good roads everywhere so why the heck do we like invest everywhere in the world and also especially because and that is also not a secret and the criteria for investing were not economic ones but political ones so you wanted all the belt and road initiative projects by chinese law need to be used also for chinese purposes if like people cannot pay back their loans but then also it includes the military use so you mean you you clearly see that the belt and road initiative was not designed to create revenues and profit but to help a political agenda and again here also the covet 19 pandemic did not help because that also hindered or brought to a whole economy economies in uh developing countries where china has been heavily investing and if i'm not mistaken it's 16 or 18 of the total after almost like 900 billion dollars that have been invested that now are under reconstruction so it's clear like the boroughs cannot pay back and so china needs to help them and the ivf he needs to help them to to uh re um whatsoever to recreate how to recreate to um rearrange the credit yeah then yes that's right they need to restructure their debts don't they but one of the big one one of the big advantages it seemed of belton road or how it managed to to dominate where other foreign infrastructure plans hadn't was that it was beijing was willing to lend to countries that other countries weren't willing to lend to but in the end has has china been too careless with who it lends to well the contracts that constitute all these credits they are not public so china doesn't make them public it's only public if like the countries they have to spread it given to is choosing to somehow publish it where it's getting leaked so all this in my opinion does not um doesn't seem to me to be like the proper way of how you do structure and build and create these these crates especially on that scale and globally and um so i can only that's just an assumption i make because there is a lack of data here but i feel because the political agenda was like always in the forefront of the mind and certainly also a a little other at least one portion of hubris was also part of the game and that now led to the situation china is in now yeah and while we're talking about chinese foreign policy let's turn to a situation that has developed dramatically over the past couple of weeks and that is taiwan so since u.s house speaker nancy pelosi's historic visit to the island china has responded with a multitude of measures almost immediately it banned imports of thousands of taiwanese products it also then banned exports of sand to taiwan which the island needs for construction and beijing created an effective blockade of taiwan with ships patrolling the surrounding waters so alexander does china really want a conflict right now well some say so and others so like clear is that china has emphasized the last years more emphasized on a non-peaceful what they call reunification and you always have to be clear like china claims taiwan as a part of the people's republic of china which just never has been so this claim is although it's just it's up in the air but like that's china's interest which the united states always said they acknowledge but not agreed to so you have this sort of political situation which is singular uh in the whole world so xi jinping has scared up his game in regard to i want taiwan back it's his goal by latest 2049 when uh the country turns 100 and it's also like apart it's like the the cornerstone of this ideology the rejuvenation of of the nation will be completed once taiwan is uh in foal and belongs to the people's republic of china within that frame there is lots of interpretation to whether or not she now wants an assault on taiwan or not so we can only say that the the assaults have gotten like more in number by crossing the the median in the taiwan strait by also like crossing into taiwanese airspace so china that's i think it's safe to say the people's republic it's safe to say wants to to make clear that in if they had to they would be taking the country by force yeah that there's that received political wisdom isn't there that if things aren't going well for you as a military as a political leader then you you start of war or at least in this case threaten it is that what we're seeing here is this taiwan business a distraction from all of those economic challenges back home that we've been talking about so i i personally would uh would say that's there's a big yes to that she she wants to become leader for life he wants to have a third tenor as a president which basically then opens the door to them uh he is not much to show for in the 20th party congress in october so being the commander-in-chief and having like a vital sort of like conflict at the doorstep and you have to remind yourself that every school child every kindergarten kid in china learns that taiwan allegedly is a part of china so he can of course like assemble people around this this claim and he can certainly because he also stepped up the ultra nationalist game during his tenure so he will he knows even despite the fact that houses are not built anymore banks do not pay uh given out money to to the people who put money in their banks that's all in his i feel in his uh rational the moment there is this conflict with taiwan uh china will unite behind him you've already mentioned how xi jinping has said that you know reuniting as he would put it taiwan with the rest of china is one of the key aims for you know his his leadership how likely there is an innovation actually looking it's very alarming when you see uh you know the military exercises going on and the boats surrounding the island but is an invasion in any way imminent so i mean i feel like mr xi is pretty much looking to mr putin and how what he did in regards to ukraine and then it was the same label kind of like we have a military trill uh but it goes to monday then they said no it's gonna be until wednesday and so it's just like so what i think the idea behind all that is like to create like the highest degree possible of uncertainty so that the taiwanese army is on their toes all the time and that this over time will wear out the people who are like adamantly staunchly like non-invade not in favor of anything that's called um reunification they also like no fans anymore of one country uh two systems because of what happened to hong kong so the idea could be to like wear them out like with military exercises or the provocations to then somehow heighten the pressure on another end economically whatever to then over time make the taiwanese bow to this pressure fully fully fledged invasion at this point military strategists say like that an amphibious assault might be possible by equipment that uh the so-called people's liberation army has but maybe not by the soldiers skill it would also be plausible or probable that this amphibious assault would be stopped by submarines be taiwanese or u.s american submarines so all in all it's like china stepped up the game has gained more capabilities military capabilities but experts say like it might not lead to a to an immediate attack on the island okay well we can i suppose hope for that uh alexander gerlach from the carnegie council for ethics in international affairs it's been fascinating to hear what you've had to say and thank you so much for joining us thanks for having me that's all for this business special looking at the challenges facing china and asking whether or not it can afford a ball thanks for watching now if you've enjoyed this there's lots more from us on the dw news youtube channel and on facebook and you know why not check out our topic of the week from last week where we discussed the true impact of sanctions on russia it's a really fascinating watch i'd highly recommend it until next time do take you

Channel: DW News

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Length: 17min 35sec (1055 seconds)

Published: Fri Aug 12 2022