The Legacy of Raisi on the Fragile Wall of China and Russia – Part 2
According to Iran Gate’s report, the bankruptcy of construction industry giants in China indicates a worsening of China’s economic situation. One of the most famous Nobel economists also believes that China has not yet entered a real and serious crisis. According to this prominent economist, China will enter a major economic crisis by 2025, a crisis that could bring a fate similar to Japan in the 1990s to Beijing.
Iran Gate has critically examined the Eastward policy of the Islamic Republic in a three-part series. This policy, which has become more prominent with the arrival of the Raisi government, has caused great concern among many analysts. The first part described Iran’s relations with Russia and China. However, in the present report, which is the second part of this series, the economic and political situation in China is examined, and potential threats to Iran are also evaluated.
Post-Crisis in Beijing
Recently, Joe Biden, the President of the United States, had expressed that the current economic crisis in China is actually a ticking bomb. Prominent economists like Paul Krugman, Nobel laureate in economics, and New York Times columnist, who had been warning about such a crisis for years, believe that this crisis has not yet reached its initial point.
According to Krugman, China’s economy is on the verge of entering a period that could replicate Japan’s fate in the 1990s for Beijing. This fate does not mean the complete collapse of China’s economy, but naturally, we should expect a severe recession and Beijing’s withdrawal from major economic competitions in the world.
Orgrand and Xi Jinping
Xi Jinping, the leader of the Communist Party of China, responded sharply to Biden’s remarks about China’s economic situation. While defending his government’s performance in the economic sector, the Chinese leader praised the country’s strong resilience, extraordinary potential, and excellent economic vitality. He tried to reassure China’s trade and economic partners about the stability of Beijing’s economy in his statements.
No one can forget the picture frame that shows the presence of Chinese tanks in the streets of Shanghai and Beijing to suppress any uprising. This uprising followed the collapse of the largest housing construction company in the country and subsequently the possible bankruptcy of several Chinese banks. Although Ourgand Company had not yet gone bankrupt at that time, some banks were seriously affected by the unfavorable conditions of this company and were in crisis. The government immediately intervened and essentially compensated for the gap caused by the bankruptcy of the banks by printing money.
But things got worse when the government faced the bankruptcy of the largest construction company in the country, Shijin Ping. In the face of this event, Shijin Ping had no solution other than printing money, and this action sparked the initial sparks of the economic crisis in China. The dimensions of this crisis become clear when we know that one-third of the wealth production in China is in the housing sector, and the largest player in the construction industry is the bankrupt Ourgand Company.
Therefore, it is predicted that despite its average growth of 9% from 1989 to 2022, China will experience a growth of around 4% this year. This statement implies a deepening and widening of the gap between the US and China, which will be good news for the White House.
The yellow dragon has aged.
In the 1970s and 1980s, many analysts believed that Japan could surpass the United States as the world’s largest economic superpower in the 2000s. Tokyo’s economic growth was so significant that many American citizens made large investments in the Japanese markets and some even considered migrating. However, Japan suddenly entered a critical crisis phase in the 1990s, causing Tokyo to fall behind in competition with the United States.
There was a major bubble in the Tokyo housing and stock markets that burst suddenly in the 1990s, causing the Nikkei stock market index in Japan to fail to return to the level it had experienced in 1989 until today. But what caused this crisis was a demographic factor that had affected the Japanese economy. What factor is now gripping Beijing’s collar, according to Paul Krugman, and will soon plunge the Chinese economy into a new phase of a serious post-crisis?
Prominent economists around the world believe that the decline in Japan’s population growth rate and the aging of its workforce were the main factors leading to a significant decrease in the investment rate in the country. This factor disrupted the balance in the labor market and laid the groundwork for Japan’s severe recession in the 1990s. The situation worsened with the negative population growth rate in Japan, ultimately causing Japan to fall behind in the competition with the world’s largest economy.
Now, many argue that China’s population policies in the 1990s and 2000s have led the Chinese people to face a serious crisis, even greater than what has been experienced in Tokyo. The governments of Jiang Zemin, Hu Jintao, and Xi Jinping adopted strict policies for Chinese families, allowing each family to have only one child. This policy, aimed at controlling population growth, has had far-reaching consequences in the country, which are evident in China’s economic arena today.
Beijing and an ailing economy
The strict population control policies in China have led to the current demographic crisis and subsequently the aging workforce. The possibility of these policies has resulted in an imbalanced economy in Beijing, with very low consumer demand. The housing and real estate sector has also faced heavy inflation, and the unemployment rate among Chinese youth is on the verge of reaching 14%, which is considered a disaster for the world’s second-largest economy.
All these factors have led prominent economists to talk about the sickness of the Chinese economy. However, this sickness does not mean that the Chinese will be stuck in the coming decades. But Krugman believes that the dimensions of this post-crisis will be much larger and more severe than what Japan experienced in the 90s. We should not forget that China, with a very small margin compared to India, is the second most populous country in the world, and naturally, a crisis in this country of 1.4 billion people can greatly affect the lives of citizens in various countries around the world.
Post-crisis in Beijing, super-crisis in Tehran
Based on the description of China’s economy, it can be concluded that Beijing will not be a suitable destination for major global investors in the future. This situation has prevented the Chinese from being recognized as a reliable and dependable partner for the world. Therefore, it was expected that the Iranian government would take steps to limit and cooperate with this relationship, considering the extensive cooperation it had with the Chinese.
However, in the past two years, with Ibrahim Raisi taking control of the executive branch, we have witnessed the boundless expansion of economic cooperation between Tehran and Beijing. Reports have been published indicating that over 90% of Iran’s oil exports go to China, which has caused great concern among experts. On the other hand, the presence of various Chinese companies in Iran has become much more prominent, which can act as a warning sign for Iran’s economy.
In a situation where most of Beijing’s economic partners are reducing their cooperation with China, the Ibrahim Raisi government has provided the space for unlimited Chinese presence in Iran’s economy. This action by the thirteenth government, which is in line with the policy of looking east, can have widespread political, economic, social, and even security consequences for Iran. These consequences have threatened the society and the semi-vital economy of the country and can pave the way for economic, social, and ultimately political collapse.
In the next section of this dossier, the consequences of excessive reliance on Russia will be discussed.
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