Thursday, September 19, 2019

Quora: If China loses the trade war with the West, would it result in political instability within China?

Mas Miwa, Always interested, especially Asia answered.

You haven’t been keeping up. One of the reasons the US has economic stability is domestic consumption. China has been moving in that direction. It’s domestic consumption is now a larger part of its GDP than trade and growing.

“China’s economy today is driven by domestic consumption. In 11 of the 16 quarters since 2015, consumption has contributed more than 60% of GDP growth. In addition to becoming the world’s biggest market for online retail, the country now represents more than 30% of global market in luxury goods, automotive, consumer appliances, mobile phones, and spirits.”

For all the hubbub about the US-China trade war, trade is a fraction of China’s economy

If you’re hoping for political instability, won’t happen anytime soon. If anything, the US will have political and economic instability before China. Why do I say that? Several reasons.

First our national debt is climbing at over a $trillion a year and is forecasted to be over $ 29 trillion in 2025 if we don’t get a handle on it.

Federal debt of the U.S. - forecast 2018-2029

“In CBO’s projections, deficits remain large by historical standards, and federal debt grows to equal 93 percent of GDP by 2029. As the effects of fiscal stimulus wane, projected economic growth falls back below the historical average.”

The Budget and Economic Outlook: 2019 to 2029

Second, Trump has forced countries to band together to trade in currencies other than the dollar and to develop an alternate to SWIFT. If this succeeds, there is a good chance the value of the dollar will fall.

“The U.K., Germany, France, Russia and China have agreed to establish a special payments system to circumvent U.S. sanctions on Iran stemming from President Trump's unilateral withdrawal from the 2015 nuclear deal, the Financial Times reports.”

EU, Russia and China reach payments deal to counter Trump's Iran move

Third, the Communist Party knows the only reason it has power is because the people view the government positively and headed in the right direction. If not, they know their ‘mandate of heaven’ is over.

“The Mandate of Heaven or Tianming literally "the will of the sky" is a Chinese political and religious doctrine used since ancient times to justify the rule of the King or Emperor of China. According to this belief, heaven which embodies the natural order and will of the universe—bestows the mandate on a just ruler of China, the "Son of Heaven" of the "Celestial Empire". If a ruler was overthrown, this was interpreted as an indication that the ruler was unworthy, and had lost the mandate.”

Right now, Xi’s rating is very, very high.

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