Francesco Sisci
The Chinese economy is divided into two parts, one geared toward domestic growth and another for exports. The structure can function because its currency, the RMB, is not fully convertible and its market is not freely accessible.
Exports help access resources for the development of dual-use Chinese technology. But the entire architecture could face a severe setback if exports and their derived surplus decline. It’s a race against time. If Chinese tech outpaces Western technology, Beijing’s strategy may prevail while the US appears uncertain about its path forward.
China has two economies that work in parallel. They influence each other, yet they live almost separate lives. One is the domestic economy which is now plagued by debt and sagging demand. The other is thriving and booming – its unrivaled export machine.
The two have a special relationship with one another, as Michael Pettis recently pointed out. Domestic development is stalling, driven by infrastructure investments with declining returns and efficiency, while the growth is led by net exports, which “contributed 30.3% to GDP growth in 2024, their highest share since 1997.”
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