China is sitting on top of the medals tally board at the Olympic Games underway in Tokyo just as the Asian behemoth also leads the global growth board. Figures released earlier this week marked a fifth straight quarter of growth with China’s gross domestic product having expanded 7.9 per cent from a year earlier during the April- June period.
Yes, the country is facing challenges of rising resource costs, a chip shortage, a strong yuan, tensions with Japan, a boundary dispute with India, maritime disputes with some Asean countries, and the trade war with the United States of America. But just as China is on top of the medals tally, it’s also the leader on the economic front.
While athletes from all countries including the abovementioned will compete fiercely to succeed at the Olympics, there is a different dynamic at work when it comes to economic competition because countries like Japan ~ not to mention the European Union, Asean, and the USA itself ~ have a vested interest in China’s growth.
Japan is a classic example of the very significant impact China’s growth prospects, given the sheer size of its economy, have on other countries. According to Japanese Finance Ministry trade statistics, its exports to China in fiscal 2020 rose 9.6 per cent from the previous year making it the largest export destination by country or region.
While Japan’s exports to other major countries have declined sharply across the board due to the Covid- 19 pandemic, China is a driving force that has supported the performance of Japanese exporting companies from leading automation, IT, and capital goods company Hitachi Ltd to hospitality major Saizeriya Co.
Both companies are extremely bullish on the China story and looking to substantially increase their investments in that country, The Japan News reported recently.
Even Japanese companies which have a more cautious approach towards operations in China such as Nissan Motors ~ which has been impacted by the shortage of semiconductors ~ are waiting and watching to see how China’s economic policies shape up rather than taking any drastic decisions.
As the world’s secondlargest economy after the USA, continuing growth momentum in China impacts large parts of the globe positively which rely on exports to Asia’s largest economy to support their own economic growth. If China’s economy falters and/or its growth rate slips, a wide range of adverse effects on the global economy would be forthcoming.
It is in light of this immutable fact that strategic thinkers need to be realistic about the various schemes and stratagems to contain China that come into fashion periodically, from the USA’s trade war to the fostering of the Quad in the Asia-Pacific and the attempt to drive a wedge between Asean and China. It’s about the economy, after all.