Geo-Economics

Why China Failing economically?

Introduction

Imagine the stark contrast between the famines of Mao’s command economy and the boom of Deng Xiaoping’s reforms – that’s China’s economic journey in a nutshell. Now, after decades of dazzling growth, the dragon faces new challenges: slowing progress, debt worries, and internal strains. This analysis delves deep, exploring trade tensions, social shifts, and the ambitious Belt and Road Initiative. Join us as we undergo a deep analysis of China’s complex economic landscape, past and present.

The History of China’s Economic Development

China’s Economy in the Realm of Chairman Mao

Prior to 1979, China, under the leadership of Chairman Mao Zedong, maintained a centrally planned, or command, economy. A large share of the country’s economic output was directed and controlled by the state, which set production goals, controlled prices, and allocated resources throughout most of the economy. During the 1950s, all of China’s individual household farms were collectivized into large communes. To support rapid industrialization, the central government undertook large-scale investments in physical and human capital during the 1960s and 1970s. As a result, by 1978 nearly three-fourths of industrial production was produced by centrally controlled, state-owned enterprises (SOEs), according to centrally planned output targets. Private enterprises and foreign-invested firms were generally barred. A central goal of the Chinese government was to make China’s economy relatively self-sufficient. Foreign trade was generally limited to obtaining those goods that could not be made or obtained in China. Such policies created distortions in the economy. Since most aspects of the economy were managed and run by the central government, there were no market mechanisms to efficiently allocate resources, and thus there were few incentives for firms, workers, and farmers to become more productive or be concerned with the quality of what they produced.

In addition, China’s economy suffered significant economic downturns during the leadership of Chairman Mao Zedong, including during the Great Leap Forward from 1958 to 1962 which led to a massive famine and reportedly the deaths of up to 45 million people and the Cultural Revolution from 1966 to 1976 which caused widespread political unrest and greatly disrupted the economy. From 1950 to 1978, China’s per capita GDP on a purchasing power parity (PPP) basis doubled from $119 in 1950 to $230 in 1978, representing an increase of roughly 93%. However, from 1958 to 1962, Chinese living standards fell by 20.3%, and from 1966 to 1968, it dropped by 9.6%.

Shortly after the death of Chairman Mao in 1976, the Chinese government decided to break with its Soviet-styled economic policies by gradually reforming the economy according to free market principles and opening up trade and investment with the West, in the hope that this would significantly increase economic growth and raise living standards. As Chinese leader Deng Xiaoping, the architect of China’s economic reforms, put it: “Black cat, white cat, what does it matter what color the cat is as long as it catches mice?”

China’s Economic Growth and Reforms: 1979-the Present

Since the introduction of economic reforms, China’s economy has grown faster than during the pre-reform period, and, for the most part, it has avoided major economic disruptions. From 1979 to 2018, China’s annual real GDP averaged 9.5%. This has meant that on average China has been able to double the size of its economy in real terms every eight years. The global economic slowdown, which began in 2008, had a significant impact on the Chinese economy. China’s media reported in early 2009 that 20 million migrant workers had returned home after losing their jobs because of the financial crisis and that real GDP growth in the fourth quarter of 2008 had fallen to 6.8% year-on-year. The Chinese government responded by implementing a $586 billion economic stimulus package, aimed largely at funding infrastructure and loosening monetary policies to increase bank lending. Such policies enabled China to counter the effects of the sharp global fall in demand for Chinese products. From 2008 to 2010, China’s real GDP growth averaged 9.7%. However, the rate of GDP growth declined slowed for the next six consecutive years, falling from 10.6% in 2010 to 6.7% in 2016. Real GDP ticked up to 6.8% in 2017 but slowed to 6.6% in 2018, (although it rose to 6.8% in 2017). The IMF’s April 2019 World Economic Outlook projected that China’s real GDP growth will slow each year over the next six years, falling to 5.5% in 2024. The question arises what is causing this slowdown? Many economists relate it to the growing suspicion in the Western World about the mammoth size of China’s Rise and its associated impact on the global political chessboard, other associated reasons include the trade war between China and the United States. There are a number of other reasons, one pertinent issue is the advent of the COVID-19 pandemic and its economic fallouts.

Economic Slowdown

China’s post-pandemic economic recovery is experiencing a notable slowdown, largely attributed to the declining demand for exports and sluggish domestic consumption. The country’s real estate market challenges exacerbate concerns about the stability of China’s financial system, posing risks of a deeper economic downturn.

In 2023, despite a dynamic start to the year, China’s economic growth momentum began waning in the second quarter of 2023. The once-reliable growth driver of exports now faces considerable hurdles, with a staggering 14.5% contraction recorded in July 2023—the sharpest decline since the onset of the COVID-19 pandemic. Weaker global demand and escalating geopolitical tensions are inflicting harm on Chinese exporters.

On the domestic front, issues in the real estate market are dampening investments, while consumer spending is dwindling as Chinese citizens adopt a more cautious approach toward job security, income stability, and overall economic prospects. In June 2023, the youth unemployment rate reached a record high, 20.0% among urban populations aged 16 to 24. Additionally, retail sales in July 2023 saw a mere 2.3% year-on-year expansion.

Although projected growth rates for China in 2023-2024 exceeded 3.0% recorded in 2022, the anticipated growth rate of approximately 5.0% still falls below the pre-pandemic level, which averaged 7.7% annually from 2010 to 2019. To revitalize the economy, the People’s Bank of China implemented interest rate cuts in June and July 2023, yet further fiscal stimulus—such as tax breaks or incentives for manufacturers—may be necessary to stimulate economic growth.

Despite persistent challenges, the manufacturing sector in China has managed to sustain growth, although at a slow pace. Industrial production expanded by 3.7% in July 2023 year-on-year, down from 4.4% growth recorded in June. Similarly, fixed asset investments grew by 3.4% in the first half of 2023, compared to a 3.8% rate a year earlier. However, Chinese factories grapple with weakened demand in export markets, domestic construction industry issues, excess capacity, and declining profit margins. Moreover, geopolitical tensions have further deterred foreign direct investment (FDI), with FDI in China in the second quarter of 2023 hitting a low of 4.9 billion dollars—its lowest level since 1998. These challenges are reflected in subdued business confidence and the continuous contraction of factory activities, underscoring the uncertain path ahead for China’s manufacturing and broader business-to-business sectors in 2023.

Overreliance on Export-Led Growth:

China’s export-led growth has been a key driver of its economic success. However, the global economic landscape has changed, with a diminishing role of global trade and an increase in protectionist measures. In 2020, China’s exports grew by 3.6%, a significant decrease compared to the 5.4% growth in 2019. Trade tensions with the United States have impacted China’s exports. The U.S.-China trade war, marked by tariffs and trade restrictions, has affected various sectors.

Debt Overhang:

China’s high levels of corporate and government debt are a concern. As of 2020, China’s total debt-to-GDP ratio was around 282%, with corporate debt accounting for a significant portion. The debt level has raised fears of financial instability. The International Monetary Fund (IMF) has highlighted the risks associated with China’s corporate debt, stating that the country’s debt levels are higher than those of other emerging market economies.

Aging Population:

China’s workforce is aging, leading to a decline in labor supply and productivity growth. In 2020, the working-age population (15-64 years) accounted for 63.5% of the total population, a decrease from 70% in 2000. The aging population has implications for pension systems, healthcare, and social services. The ratio of elderly dependents (65 and older) to the working-age population is rising, putting pressure on support systems.

Population Decline:

China’s population, which had surged to 1.4 billion, is now experiencing a historic decline. The removal of the one-child policy in 2016 has not led to a significant increase in birth rates. In 2020, China’s population stood at approximately 1.41 billion, reflecting a decrease from 1.44 billion in 2019. The declining population has economic ramifications, affecting consumer markets, labor force dynamics, and social welfare programs.

Fertility Rate:

Despite efforts to encourage childbirth, China’s fertility rate remains low. In 2020, the total fertility rate was 1.3 births per woman, well below the replacement level of 2.1. The United Nations projects a further decline in fertility rates, even under optimistic scenarios. The challenges in boosting fertility rates include changing societal norms, high living costs, and the impact of past population control policies.

Structural Imbalances

Overcapacity in Real Estate and Industry:

China has experienced overcapacity issues in various industries, including steel, coal, and manufacturing. In 2016, estimates suggested that China’s steel production capacity was about 1.2 billion metric tons, exceeding domestic demand. While capacity has decreased since 2016, estimates suggest it still sits around 1.1 billion metric tons, exceeding domestic demand by over 200 million tons. This continues to fuel concerns about China’s role in global steel trade and potential dumping.

China’s coal production capacity continues to exceed demand, leading to stockpiles and pressure on coal prices. In November 2023, China’s coal production reached 861 million tons, while consumption was 722 million tons. Likewise, cement production capacity is estimated to be around 2.5 billion tons, while domestic demand sits closer to 1.4 billion tons. Overinvestment in real estate has contributed to excess housing inventory. According to China’s National Bureau of Statistics, the total floor space of unsold homes in China reached 700 million square meters in 2020, highlighting the overcapacity issue.

Property Bubble:

China’s real estate market has been a significant driver of economic growth, but concerns about a property bubble and overvaluation have emerged. In 2020, the average new home prices in China’s 70 major cities rose by 3.8%, contributing to fears of a property bubble. While the rapid price increase of 2020 has subsided, prices remain high. In October 2023, average new home prices in 70 major cities saw a modest year-on-year increase of 0.7%, showing stabilization rather than a decline.

Property speculation and excessive borrowings are contributors to instability. Despite government efforts to stabilize the market, home sales continue to experience significant declines. In November 2023, sales volume of floor space in key cities dropped by 36.2% year-on-year, reflecting decreased buyer confidence.

Inefficient State-Owned Enterprises (SOEs):

State-owned enterprises dominate key sectors such as energy, telecommunications, and finance. However, many of these SOEs operate inefficiently, leading to resource misallocation and hindering competition. In 2019, the efficiency of Chinese SOEs was a topic of concern. The World Bank reported that the return on assets for Chinese SOEs was significantly lower than that of private firms, indicating operational inefficiencies. A McKinsey Global Institute report in September 2023 revealed that SOEs lag behind private firms in productivity by 20-40%. This gap persists despite reforms aimed at improving competitiveness. A McKinsey Global Institute report in September 2023 revealed that SOEs lag behind private firms in productivity by 20-40%. This gap persists despite reforms aimed at improving competitiveness.

Weak Consumption and Low Innovation:

China’s economic model has been criticized for being too reliant on investment and export-driven growth, with insufficient emphasis on domestic consumption. Although there’s been modest growth, household consumption as a share of GDP reached 55.4% in 2023, still lagging behind desired levels. Despite significant progress in innovation, China faces challenges in transitioning towards a more innovation-driven economy. China’s ranking in the Global Innovation Index improved to 12th in 2023, showcasing progress in areas like research and development spending and venture capital investment. However, concerns remain about the translation of research into commercially viable products and the need for a more open and collaborative ecosystem.

Financial Vulnerabilities

Shadow Banking

China’s real estate problems have again drawn attention to the world of shadow banking and the risks it poses to the economy. Shadow banking — a term coined in the U.S. in 2007 — refers to financial services offered outside the formal banking system, which is highly regulated. In contrast, shadow bank institutions can lend money to more entities with greater ease, but those loans aren’t backstopped in the same way as traditional banks can. That means sudden and widespread demand for payment can have a domino effect. On top of that, limited regulatory oversight of shadow banking makes it hard to know the actual scale of debt – and risk to the economy. In February 2024, Zhongrong International Trust failed to make payments on multiple investment vehicles, raising fresh concerns about systemic risk. Similarly, despite government intervention, the ongoing struggles of property giant Evergrande continue to cast a shadow over the real estate sector, indirectly impacting shadow lenders.

In China, the government has tried to limit the rapid growth of such non-bank debts. Developers were able to borrow liberally from shadow banks, bypassing limits on borrowing for land purchases. What makes the country’s situation different is the dominance of the state. The largest banks are state-owned, making it harder for non-state-owned businesses to tap traditional banks for financing. The state-dominated financial system also meant that until recently, participants borrowed and lent money under the assumption the state would always be there to provide support with a guarantee. Estimates of the size of shadow banking in China vary widely but range in trillions of U.S. dollars. China’s secretive shadow banking industry includes gigantic financial institutions and is worth more than $3 trillion – that’s roughly the size of Britain’s economy. But, after years of exponential growth, several firms have defaulted on billions of dollars of payments to investors.

Uncertainty in the Property Market

The property market is a significant driver of China’s economic growth, but concerns about affordability, overvaluation, and speculative activities have increased risks. The average new home prices in China’s 70 major cities rose by 3.8% in 2020, contributing to fears of a property bubble. The property market accounts for a significant portion of household wealth, making it susceptible to fluctuations. In 2021, China Evergrande Group, one of the country’s largest property developers, faced a debt crisis, heightening concerns about the stability of the property market and its potential spillover effects.

Mounting Non-Performing Loans

The accumulation of non-performing loans (NPLs) in China’s banking sector is a notable financial vulnerability. As of 2021, the official NPL ratio in Chinese banks was reported to be around 1.74%, representing a slight increase from previous years. The true extent of the NPL issue may be higher, as there are concerns about the accuracy of official data.

External Pressures

US-China Trade Tensions

US-China trade tensions have negatively affected consumers as well as many producers in both countries. The tariffs have reduced trade between the US and China, but the bilateral trade deficit remains broadly unchanged. As of 2022, US-China total trade reached an estimated $758.4 billion, a slight increase from 2021’s $757.8 billion, and the US-China trade deficit stood at $367.4 billion.

In 2018, the US imposed tariffs sequentially on three “lists” of goods from China, targeting first $34 billion of annual imports, then $16 billion more, and finally an additional $200 billion. As a result, US imports from China have declined quite sharply in all three groups of the goods on which tariffs were imposed.

Global Economic Uncertainty:

The global economic landscape has faced uncertainty, exacerbated by factors like the COVID-19 pandemic and rising geopolitical tensions. China, as a major player in the global economy, is not immune to these challenges. In 2020, the International Monetary Fund (IMF) projected a contraction of 4.9% in the global economy. China, heavily reliant on exports, faced a decline in external demand, impacting its economic performance.

Shifting Global Supply Chains:

The trend of diversifying global supply chains away from China has been accelerated by factors such as trade tensions, rising production costs, and the desire for risk mitigation. Some companies have been relocating manufacturing operations to other countries, impacting China’s export competitiveness. A report by the United Nations Conference on Trade and Development (UNCTAD) in 2022 highlighted a decline in foreign direct investment (FDI) inflows to China, signaling a potential shift in global investment patterns. A 2022 McKinsey Global Institute report estimated that US companies alone could shift 20-30% of their sourcing away from China by 2030.

China’s Massive Belt and Road Initiative

The Belt and Road Initiative (BRI), often called the New Silk Road, is a massive project launched by China’s President Xi Jinping in 2013. It aims to connect East Asia to Europe through infrastructure like railways, highways, and energy pipelines. Over time, it has expanded to include Africa, Oceania, and Latin America, boosting China’s influence worldwide. Xi Jinping envisioned a network of transportation and economic zones spanning Asia to enhance connectivity and promote the use of China’s currency, the renminbi. China also promoted its technology, such as Huawei’s 5G network, and invested in port development for maritime trade along the Indian Ocean. The BRI is ambitious, with 147 countries participating so far, covering a large portion of the world’s population and economy.

However, some see it as a way for China to extend its power, and there’s growing opposition due to rising project costs. In 2022, Sri Lanka faced economic difficulties and defaulted on loans for a BRI-funded port project. The project costs reportedly ballooned from an initial estimate of $1 billion to over $8 billion, raising concerns about unsustainable debt burdens. A 2021 report by AidData, a research lab, found that the average cost of BRI projects rose by 35% between 2013 and 2020. Another report by the World Bank in 2022 highlighted the risk of “debt distress” for some BRI recipient countries.

In Malaysia, the new government in 2018 reviewed and renegotiated several BRI projects due to concerns about transparency and feasibility. Some projects were cancelled or scaled back. Likewise, a 2022 survey by the Pew Research Center found that public opinion towards China’s economic influence is increasingly negative in many countries along the BRI route, with concerns about debt and lack of transparency.

The United States is also concerned that the BRI could serve as a cover for China’s military expansion. To counter BRI, the US has struggled to offer alternative economic opportunities. President Biden has continued to be cautious about China’s actions.

Social and Cultural Shifts in China

China has experienced remarkable social and cultural shifts in recent years, notably in urbanization, social expectations, and the emphasis on education and innovation.

Urbanization has been a defining trend, marked by millions relocating from rural to urban areas. The urbanization rate surged from 17.9% in 1978 to approximately 63.9% in 2020, driven by industrialization and improved living standards. To ensure sustainable growth, China endeavors to balance rural and urban development. Policies like the “New-type Urbanization Plan” aim to integrate rural migrants into urban centers and upgrade infrastructure in rural regions.

As China’s economy burgeoned, its citizens began demanding a higher quality of life, environmental conservation, and enhanced social welfare services. China unveiled the “dual circulation” strategy in 2020, prioritizing domestic consumption and innovation to improve overall well-being, reflecting a shift in focus beyond mere economic growth.

In education and innovation, China has made substantial investments. The gross enrollment rate in tertiary education soared from 8.9% in 1978 to 51.6% in 2019. Innovation has also emerged as a core agenda, with China becoming the world’s second-highest spender on research and development (R&D) in 2020.

However, these advancements are not without challenges and implications. Urbanization, while offering economic prospects, presents hurdles such as inadequate infrastructure, social disparities, and environmental degradation. The government faces the dual challenge of sustaining economic growth while addressing environmental concerns, enhancing social welfare, and narrowing income disparities.

End Note

China faces challenges that could impact its growth. Economic growth has slowed, with concerns about overcapacity, particularly in real estate and industries. Structural imbalances, such as inefficient state-owned enterprises and reliance on exports, pose risks. Financial vulnerabilities include high corporate and government debt, banking sector challenges, and risks in the shadow banking system. Trade tensions with the U.S., global economic uncertainty, and evolving global supply chain dynamics add external pressures. Social and cultural shifts, like rapid urbanization and rising expectations, further complicate matters. Successfully navigating these challenges is vital not only for China’s economic well-being but also for global economic dynamics.

Analysis

How China energy demands are soaring?

The rise in energy demand has been a defining feature of industrialization, beginning with Britain in the late 18th century, where the emergence of factories powered by steam engines led to a dramatic surge in coal consumption. This transition from agrarian economies to industrial powerhouses not only spurred manufacturing growth but also significantly increased urban populations, as coal facilitated industries like textiles and metallurgy and fueled transportation advancements, notably railways.

Following Britain, countries like Germany and France in Europe adopted similar energy-intensive practices, incorporating electricity to further enhance productivity. In the United States, the late 19th and early 20th centuries saw rapid industrialization, driven by the expansion of railroads and the automobile industry, which created new energy needs primarily met by coal and oil, while electricity revolutionized industry and domestic life. Today, China’s transformation from an agrarian society to the “world’s factory” marks a new chapter in this narrative, characterized by unprecedented industrial growth and an extraordinary demand for energy resources, particularly coal. Yet, Chinese energy appetite is growing at an unprecedented level, making it many times larger than those of western Industrial giants.

While China itself possesses vast resources, the country’s foremost status as the largest consumer in the world is as a result of rapid industrialization, urbanization and an ever-growing demand for technological advancement. China has continued to face the pressure of energy demand through manufacturing, infrastructure, and an attempt to control the technological sector. As China turns its focus to AI, EVs, and smart manufacturing, its insatiable appetite for resources – be it, fossil or renewable – is reshaping energy demand, markets and supplies, and geopolitics in unprecedented ways.

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Overview of China’s economic growth and Industrialization

The growth and transformation of China’s economy are subtle but powerful.

—Francisco Betti

Over the past four decades, because of economic reforms, China’s economy is growing at an unprecedented rate of more than 9 percent, and this has lifted more than 800 million Chinese citizens out of poverty. Energy demand in China has remarkably reached higher levels, since the Chinese Economy has expanded at a very high rate.

The export-oriented growth model of the country that was mainly led by investments and exports is shifting towards the consumption and services sector. China’s Gross Domestic Product expanded by 5% year on year in the first half of 2024 but the quarterly growth rate has calmed down from 5.3% in the first quarter to 4.7% in the second half indicating the need for stronger policy support to achieve the set year’s targets. While extreme poverty was eliminated by 2020, still, 17.2% of the population lives on under $6.85 a day.

Global energy consumption trends are being dictated by Asia’s energy consumption titan “China”, owing to its mammoth size. China overtook Europe in per capita energy consumption in 2023 backed up by more renewable capacity alongside coal fired power. Having been the world’s factory, China’s energy consumption requirements are escalating. The Dragon economy has displayed consistent growth in renewable power, especially renewable electricity, with freshly installed renewable energy capacity of 1.59 billion kilowatts early in 2024. Still, it needs investment in infrastructure, smart grid, and energy transition to support its economic growth, maintaining energy security and sustainability.

Factors Contributing to Rising Energy Demands

The foremost factor driving energy demand is the industry, for instance, the sector has experienced substantial growth in 2024, with the added value of major industries rising by 6% in the first half of the year. The high-tech industry, in particular, saw an impressive 8.7% growth rate. This industrial expansion has been accompanied by increased energy demands, driven primarily by urbanization. China’s cities now consume more energy than its industrial sector due to the rising living standards of a growing middle class and large-scale migration to urban areas. It is predicted that for every 1% increase in urbanization, the country’s energy consumption will rise by at least 60 million tons of coal.

The urbanization rate in China has soared from 17.92% in 1978 to 66.16% in 2023, and this movement is expected to continue, with the government aiming to create over 12 million jobs in metropolitan areas by 2024. As urbanization increases, so does energy consumption, as city households consume 50% more energy than rural ones. By 2025, China’s power consumption is anticipated to reach 10,498 TWh, compared to 4,475 TWh in the United States.

China is also focusing on technological advancements and renewable energy to meet its growing energy needs. Investments in 5G networks, artificial intelligence, and renewable energy sources such as wind and solar reflect the country’s commitment to modernizing its industrial and energy infrastructure. The “Made in China 2025” campaign highlights China’s ambition to become a global technological leader. However, balancing energy demand with sustainable consumption remains a complex task, as the adoption of advanced technologies and rapid urbanization continues to fuel the nation’s rising energy requirements.

Energy Mix of the Dragon

The main sources of energy in China’s energy mix are still coal, oil, and natural gas. China relies heavily on these resources. By mid-2024, China accounted for 54% of the world’s coal-fired power capacity, with 1,147 GW in operation. Even the number of new coal power approvals has slowed down recently—just 12 new projects were approved in the first quarter of 2024—coal still plays a mammoth role in the energy mix. Globally, China helped install 67% of the coal-fired capacity that was being commissioned in 2023.

Where China imports its fossil fuels from?

As Gas imports are concerned, China is the world’s largest importer of natural gas, bringing in both pipeline gas and liquefied natural gas (LNG) to meet its growing energy demands. Russia, the Power of Siberia 1 pipeline remained one of the main suppliers of natural gas to China. This pipeline supplied nearly 38 billion cubic meters of natural gas in 2024. Turkmenistan is also a key contributor of approximately 33 billion cubic meters. Uzbekistan and Kazakhstan also contributed significantly.

The country is also a major importer of LNG, and the largest supplier, Australia supplied nearly 24 million mt of LNG by 2024. Qatar’s LNG exports amounted to 25 million mt in 2024 to China. United States 12 million tons. Malaysia and Indonesia jointly exported around 15 million mt of LNG to the Chinese market.

Despite having abundant coal resources, the country heavily relies on imported coal. China’s major supplier of coal is Indonesia; all through the year 2024, importers bought about 130 million tons of coal. Russia supplied about 70 million tons and Australia about 55 million tonnes of coal. Mongolia supplied about 30 million tons.

Renewable Energy

China has installed 1,180 GW of solar and wind power by early 2024, more than coal’s 1,146 GW for the first time. Compared to previous years, China added almost twice as much utility-scale solar and wind capacity in 2023. Between 2023 and 2028, the nation is anticipated to contribute 56% of the additional renewable capacity globally. This expansion is facilitated by government regulations and investments, which include notable developments in the production of wind turbines and solar photovoltaic (PV) systems. China’s rapid deployment of renewable technologies reflects its commitment to achieving net-zero emissions by 2060, although the country will need to manage the ongoing role of coal and other fossil fuels in its energy usage.

Challenges and Implications

China’s rapid industrialization and heavy reliance on coal have led to severe environmental challenges, including widespread air pollution and significant greenhouse gas emissions. While the country is a global leader in renewable energy expansion, particularly in wind and solar capacity, its dependence on coal hampers progress in environmental protection. Despite incorporating more renewable energy sources, the nation faces issues like system congestion and curtailment, with solar power curtailment exceeding 5% in March 2024, highlighting the challenges in managing the surge in renewable energy and effectively integrating it into national power grid.

Likewise, if we look outside of China, the situation depicts China’s vulnerability on imported energy and its continuous reliance on the littoral states from where the imports are being made. For instance, the South China Sea dilemma is one such bad dream, which haunts China and it desperately wants to get complete control of the maritime routes either by hook or by crook. This region is significant for Chinese energy imports, as over 80% of China’s imported oil is shipped through the South China Sea region and dominance of these sea lanes is crucial for PRC’s energy policy.

As a result, China has intensified its naval patrols in the area to protect its sea communications from disruptions due to ownership of the economic zones or presence of foreign navies. One of them concerns the creation of Ultra High Voltage (UHV) transmission lines to interconnect renewable energy centers, wind and solar in western China with densely populated areas in the eastern part of the country. Furthermore, China is gradually expanding on the demand for coal fired power because risks on access to the energy mix from suppliers may be disrupted by tensions in the South China Sea and competition with other main energy consumers like the U.S., Japan and India.

Future Outlook

Significant changes in China’s energy sector are anticipated over the next few years, with electricity generation projected to increase at a rate of 3.33% annually from 2024 to 2029. This growth is primarily driven by the rapid development of renewable energy sources, particularly wind and solar power, as well as the increasing energy demands of the nation.

By the end of 2024, China is expected to add 1,200 GW of wind and solar capacity, surpassing earlier projections and achieving ambitious targets ahead of schedule. This expansion is part of China’s overarching plan to enhance its total renewable power generation capacity by over 300%—or 3.9 TW—from 2022 to 2030. However, despite these advancements, coal power continues to play a significant role in China’s energy mix, as new coal projects are still being pursued to manage the intermittency associated with renewable energy sources.

Plans are underway to integrate a unified national power market by 2030 to improve the efficiency of renewable resource utilization and mitigate fluctuations in energy supply and demand. To fully harness renewable energy resources, advancements in storage technologies and improvements in the power distribution network are necessary, including the deployment of Ultra High Voltage (UHV) transmission technology to connect renewable energy sources with demand centres across the country.

End Note

China’s energy landscape is shaped by rapid economic growth, urbanization, and industrial demand. Despite significant investments in renewable energy like solar and wind, coal remains a major part of the energy mix due to its role in ensuring energy security. China intends to significantly increase its use of renewable energy by 2030 and is on target to surpass 1,200 GW of wind and solar capacity by the end of 2024.

Reducing reliance on coal and integrating these renewables into the grid are still major obstacles, though. Addressing these issues is crucial for China’s sustainable growth and its impact on the global energy market. Effective management of this transition will be essential for achieving environmental goals and maintaining economic stability.

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Analysis

Is Japan living in the Future?

From the land of the samurai to the forefront of innovation, Japan’s journey is nothing short of remarkable. After WWII devastation, Japan not only rebuilt—it redefined the future. In the 1980s, they gave us the Walkman, revolutionizing personal tech, and the Shinkansen, the first bullet train, forever changing travel; but that was just the beginning. Today, Japan leads the world in robotics, smart cities, and even space exploration. Picture specialized robots that care for the elderly, cutting edge vending machines that predict your cravings, and magnetic levitating trains that hover on air.

Japan is living in the future through innovations that feel straight out of science fiction. Cities like Fujisawa are designed as smart ecosystems, where energy, transportation, and homes are connected and run by the network of artificial intelligence. From smart cities to space exploration, Japan isn’t just dreaming of the future—it’s already living it. Let’s have a glimpse of the future by pondering the question, “Is Japan really living in the Future?”

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AI Integration: Powering Daily Life with Artificial Intelligence

Hold on to your sushi rolls, because Artificial Intelligence isn’t just a distant dream in Japan; it’s a thriving reality. With a predicted 920,000 AI-related jobs by 2030, 52% of Japanese enterprises currently riding the AI wave, and a $4.9 billion market target, Japan is rapidly becoming the Silicon Valley of the East.

From robots to research institutes, Japan’s AI scene is thriving, with firms garnering over $1 billion in funding in 2020 alone. The country is setting its sights on a massive AI market and wants to train a tiny army of AI engineers by 2025. Japan produces roughly 45% of the world’s industrial robots, which drive efficiency in industries ranging from manufacturing to healthcare. For instance, PARO, a therapy robot, is utilized in more than 30 countries to help dementia patients.

Japan also leads in AI development, with corporations such as SoftBank and Sony. The advent of automated convenience stores, such as FamilyMart’s AI-powered stores, eliminates the need for human employees, while smart toilets outfitted with health sensors and built-in AI health diagnostics are becoming more ubiquitous in homes and public places. The Japanese government’s “Society 5.0” effort embodies the country’s goal for an AI-powered future in which technology solves societal problems. Japan has invested more than $20 billion in AI and robotics innovation, establishing itself as a global leader in automation, digital healthcare, and smart city development.

Japan is paving the way for a tech-driven future, with AI-powered cars, maglev trains reaching speeds of over 600 kilometers per hour, and smart home systems becoming the standard.

Efficient Infrastructure

Japan’s reputation extends beyond its rich culture to its remarkable infrastructure. With a population of 123.3 million in a compact area, Japan’s transport system is a model of efficiency. The Shinkansen (bullet train) is renowned for its speed and punctuality, reaching up to 320 kilometers per hour and covering major routes like the 370 kilometers route between Tokyo and Sendai in just 1 hour and 33 minutes. Adding to this, futuristic maglev trains can zoom at over 600 km/h, showcasing Japan’s cutting-edge transport technology.

Tokyo’s extensive network includes 882 train stations, with 282 subway stations ensuring eco-friendly, efficient travel. Japan’s airports, such as Haneda and Kansai, manage millions of travelers seamlessly. As an island nation, Japan excels in both shipping and air freight, supported by 5,000 ports and a significant merchant fleet, making it a global leader in commerce. The country’s infrastructure includes 1,218,800 kilometers of highways and 27,000 kilometers of railways, excellent for robust connectivity.

Unique Lifestyle and Culture

Japan’s cities are a stunning fusion of tradition and modernity. In Tokyo, futuristic skyscrapers like the Tokyo Skytree rise 634 meters above ancient temples such as Senso-ji, creating a mesmerizing urban landscape. This blend of old and new is not just visual but experiential. Japan is a leader in integrating high-tech gadgets into daily life. Wearable translation devices, such as Pocketalk, can translate 74 languages in real-time, making communication effortless for travelers.

Holographic displays are becoming more common in places like Shibuya, offering interactive experiences in shopping and entertainment. The nation’s innovation extends to its cultural practices. For instance, the Ghibli Museum in Mitaka features interactive exhibits that blend technology with traditional storytelling, captivating millions of visitors. Japanese cities also showcase cutting-edge robotic technology in everyday life, from humanoid receptionists at hotels to robotic baristas in cafes.

“The Japanese way of working is characterized by a relentless pursuit of perfection and a deep respect for discipline and detail.”

(Kenichi Ohmae)

In July 2024, Japan unveiled a new series of banknotes featuring cutting-edge anti-counterfeiting technology, including three-dimensional holographic stripes and tactile markers for the visually impaired. This update to the ¥10,000, ¥5,000, and ¥1,000 notes reflects Japan’s commitment to blending advanced technology with its rich cultural heritage.

Japanese culture is also marked by discipline and social responsibility, as seen in the “Osouji” custom, where people rigorously clean public spaces, such as stadiums, after events. Additionally, Japan’s education system emphasizes innovative teaching and STEM subjects, highlighting its focus on cultivating a forward-thinking society.

Work Ethic and Social Values

Japan’s work ethic is renowned for its emphasis on efficiency, discipline, and continuous improvement. The concept of “kaizen” which means “continuous improvement”, is embedded in every aspect of Japanese business and culture.

Taiichi Ohno, a pioneer of the Toyota Production System, said: “Without standards, there can be no improvement.”

Companies like Toyota have perfected this philosophy, leading to a 25% increase in productivity over the past decade by refining processes and fostering innovation. This relentless drive for progress is also reflected in Japan’s high employee retention rates and the culture of lifetime employment that remains influential, despite changing global trends. Respect for nature is deeply ingrained in Japanese values, visible in meticulously maintained traditional gardens and the integration of eco-friendly practices in daily life.

,“The ultimate goal of farming is not the growing of crops, but the cultivation and perfection of human beings.”

(Masanobu Fukuoka)

For example, Tokyo’s Eco Tokyo initiative aims to reduce greenhouse gas emissions by 30% by 2030. Additionally, Japan leads in recycling, with a 90% recycling rate for plastic bottles, thanks to rigorous sorting and community participation.

End point

In essence, Japan’s blend of advanced technology, efficient systems, unique lifestyle, and cultural values not only highlights its remarkable progress but also sets it apart as a nation truly living ahead of its time. With a relentless pursuit of innovation, from the world-renowned Shinkansen to cutting-edge banknotes, and a deep respect for tradition and sustainability, Japan integrates the past with the future. Japan’s ability to harmonize these elements ensures it remains at the forefront of the future, demonstrating how a nation can balance technological advancement with enduring cultural heritage.

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Analysis

How does it feel like living in the Philippines as an American Expat?

For Americans, relocating to the Philippines may be like stepping into a colorful tapestry where East and West collide in the most surprising manner. Imagine yourself in a busy metropolis, where modern malls are just a short distance away and street sellers are selling delicious street cuisine. You travel across verdant islands with glistening waters, but you also have to become used to a new way of life and set of cultural customs. There are always fresh adventures and a few surprises to look forward to every day in this special blend of difficulty and excitement. Living in the Philippines is an exciting and enlightening experience, ranging from acclimating to local customs to enjoying great, yet foreign dishes. Ready to dive into this captivating journey? Let’s explore!

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Living in the Philippines as an American

Living in the Philippines as an American is an intriguing experience that brings together two opposing worlds. On one side, there’s the allure of sunny beaches, vibrant festivals, and a strong sense of community. On the other hand, there is the issue of adapting to new cultural norms, local languages, and lifestyles. It’s a location where American ideas combine effortlessly with Filipino customs, resulting in a setting that is both familiar and pleasantly unique. Whether it’s the people’s kindness, the vibrant food scene, or the slower pace of life, living in the Philippines provides a distinct blend of comfort and adventure that can be both eye-opening and profoundly satisfying.

You can never be bored in the Philippines thanks to its beaches and many islands, which is one of the main draws for Americans. Currently, over 35,000 Americans reside in the Philippines, accounting for 1.3% of all Americans living overseas.

This Southeast Asian jewel has beautiful tropical beaches, low-cost living, and a laid-back lifestyle that appeals to people seeking both adventure and relaxation. From bustling urban hubs like Manila and Cebu to the tranquil charm of its islands, the country offers a unique experience. Its English-speaking populace, thriving expat communities, and strong Western influences make it particularly desirable to Americans looking for long-term vacation.

Cultural Experience and Hospitality

One of the Philippines’ biggest strengths is its well-known hospitality, as evidenced by its ranking as the first country in Asia and in the Top 8 countries in the world. Over the years, the nation has gained a reputation for showing true hospitality to tourists, immigrants, and expats. The intense heat on the streets may not dampen the friendly grins and cordial greetings that Filipinos always bestow upon you.

An American’s Perspective On Filipino Hospitality

When asked about his experience in the Philippines, an American replied, “Honestly, Filipinos are some of the most generous and welcoming people I’ve ever met. When I married my wife, I didn’t just marry her immediate family of five—I became part of this massive extended family with dozens of aunts, uncles, cousins… the whole package. It’s almost like marrying into an entire country of over 100 million people. And Filipino hospitality, it’s not just about giving you a warm welcome; it’s like they’re making you part of their family. In the Philippines, guests are treated like royalty. They’ll go all out, preparing these huge meals, even if they can’t really afford it. What’s amazing is, this doesn’t stop when they leave the country. It’s like they carry that sense of hospitality with them wherever they go. You’ll always hear ‘Kain na’—which means ‘Let’s eat’—or ‘Kumain ka na ba?’—‘Have you eaten yet?’—and it just makes you feel instantly at home.”

Another visitor stated, “Coming from an Italian family, I thought I knew a thing or two about hospitality. But Filipinos? They take it to the next level. Their parties are overflowing with food, and when you leave, you’re not just full—they send you home with enough leftovers to feed an army! But it’s more than just the food—it’s that deep sense of belonging they give you. They welcome you with open arms, excited to share their culture, and it feels like you’re one of their own. I’ll admit, sometimes it can be overwhelming—especially when privacy is scarce and the celebrations never seem to end. But at the end of the day, you come back appreciating their warmth and acceptance even more. Filipino hospitality is all about making everyone feel like family, no matter where you’re from.”

How Filipinos Welcome with open Hearts

Filipinos are a remarkable, known for their resilience, strong family ties, and ability to smile even in the face of hardships. What truly makes them stand out, however, is their unique brand of hospitality. Whether dealing with locals or foreigners, Filipinos have a natural warmth that makes everyone feel like family. This trait has been ingrained in their culture for centuries, with early ancestors welcoming traders and foreigners with open arms long before colonization. Even today, this welcoming spirit is alive and well, creating a lasting impression on those who experience it.

Filipino hospitality isn’t just about politeness—it’s an act of genuine care. From offering slippers and food to ensuring a guest’s comfort, Filipinos go out of their way to make people feel at home. It’s a gesture that reflects their deep-rooted values of generosity and compassion. Even if they have little to give, they will still find a way to share whatever they have. This is true even among the poorest, who would gladly offer their last bowl of rice to make a guest feel welcome.

Beyond generosity, Filipino hospitality is about forming meaningful connections. When you are welcomed into a Filipino home, you aren’t just a guest—you become part of the family. Filipinos treat their visitors with the same love and care they offer their own relatives, leaving a lasting impression that goes far beyond the visit itself. This sense of belonging is what makes Filipino hospitality so memorable and cherished by people from all over the world.

Even in a fast-changing, modern world, Filipino hospitality remains a vital part of the culture. It’s more than just tradition; it’s a reflection of the Filipino spirit—one that values kindness, inclusion, and the importance of making others feel at home. This enduring trait is something Filipinos are rightfully proud of and continue to pass on to future generations.

Some short facts about the Philippines

First, here are some essential things you should know about the Philippines:

Capital: Manila

Main languages: Filipino and English

Population: around 119 million (119,106,224)

Currency: Philippine Peso (PHP)

Government type: democratic and presidential representative federal republic

Religion: Christianity

Visas and Legal Considerations

U.S. citizens can relocate to the Philippines for various reasons, including work, education, retirement, business, or to join family members. While U.S. citizens can enter the Philippines visa-free for up to 30 days as tourists, longer stays require specific visas. It’s important to choose the appropriate visa based on your situation, especially if you plan to work. Those looking to work need a 9(g) Work Visa, which costs around $400 and requires proof of employment and a provisional work permit. Other visa options are available depending on the purpose of your move, such as for retirement or education.

For retirees, the Special Resident Retiree’s Visa (SRRV) is available for individuals over the age of 35 who are in good health. This visa comes with financial requirements, such as maintaining a $20,000 deposit or investing in real estate, and the application fee is $1,400, with a $360 annual renewal fee. Students can apply for the 9(f) Student Visa if they’ve been accepted into a recognized educational institution in the Philippines, with an application fee of $250. Those who are married to Filipino citizens can apply for a spouse visa, allowing for a longer stay.

The visa application process is fairly simple and requires submitting essential documents such as a valid U.S. passport, medical and physical examination reports, police clearance, visa fees, and four passport-sized photos.

Cost of Living as an American Expat

Moving to the Philippines offers a more affordable cost of living compared to the U.S. Everyday expenses are significantly lower. For example, a three-course meal for two people costs about $21.52 in the Philippines, compared to $75 in the U.S. A loaf of bread is $1.19 compared to $3.54, and a 0.5-liter domestic beer is just $1.26 versus $6. Public transport is also far cheaper, with a monthly pass costing $10.14 compared to $70. Basic utilities cost around $100.15 monthly in the Philippines, while in the U.S., they average $188.70. Rent for a 1-bedroom apartment in a city center is about $324.40 in the Philippines, much lower than the $1,708.27 average in the U.S., and purchasing property is also more affordable at $2,616.76 per square meter compared to $4,692.35.

Prices will vary greatly depending on where you move. Living in the city center is likely to be more expensive than in a rural area. The Philippines has a 52% lower average cost of living than the US, which is beneficial to consider. As shown in the table above, property is also far less expensive.

Cost of migrating to the Philippines

Before you can focus on daily living expenses in the Philippines, it’s important to account for the cost of transportation, especially when relocating from abroad. This includes shipping your household goods and covering airfare for family members. If you’re bringing pets, additional arrangements will need to be made for their transport as well. On average, shipping a full container from the U.S. to the Philippines ranges between $850 and $4,500, depending on the size and location. While shipping by sea is generally cheaper, it also takes longer than air freight. The exact cost will depend on the volume of your belongings and your departure and arrival points, so obtaining quotes from shipping companies is crucial to planning your move.

Once you’re in the Philippines, securing housing becomes a priority. Many expats choose to rent initially, as it offers flexibility to explore different areas before settling down. Both rent and property prices in the Philippines are substantially lower than in the U.S., making it more affordable to rent or buy a home. Healthcare is another vital aspect to consider; while the public healthcare system is underfunded and ranks low internationally, private healthcare offers a higher quality of care. Most expats opt for private health insurance to ensure access to better medical services. In terms of daily life, banking is relatively straightforward, though opening a local bank account typically requires an in-person visit. Public transportation is affordable, but systems like jeepneys and buses can be unpredictable, so learning to navigate them efficiently is key to easing your transition.

Challenges

Living in the Philippines comes with its own set of challenges, particularly in major cities like Manila. One of the biggest issues is the heavy traffic, which can make commuting long and unpredictable. The congestion, combined with variable road conditions, can make driving stressful, so many expats rely on public transport or hire drivers to navigate the city more efficiently.

Another common challenge expats face is the so-called “skin tax,” where foreigners may be charged higher prices for goods and services simply because they’re perceived to have more wealth. This can apply in markets, transportation, and even housing, so it’s important to be aware and, when possible, negotiate prices or seek recommendations from locals to avoid overpaying.

Addressing Unexpected Import Duties and Customs Challenges in the Philippines

Hello, I am British and for the past few years I have been regularly sending boxes to my Filipino daughter in law, I am sending stuff like clothes and toys and books for my grandchildren. She was never required to pay import duty before now. The last 3 boxes I sent her with similar contents to all the previous boxes, she had to pay a total of 27,000 pesos import duty. I want to see a breakdown of the import duty but she is never given or sent any paperwork just told to pay the delivery driver.Anyone got advice on dealing with Philippines Customs import duties.RegardsRon

Expats in the Philippines often encounter unexpected import duties and customs challenges, which can lead to confusion and frustration. For instance, many expats sending personal items like clothing, toys, and books may find that, despite prior shipments being duty-free, recent boxes are subjected to significant import fees. This can be particularly distressing when customs charges appear without clear explanation or official documentation. Typically, recipients are required to pay duties directly to delivery drivers without receiving a detailed breakdown of the fees. This lack of transparency makes it difficult to understand or dispute the charges.

What Living in the Philippines Was Like: An Expat’s Perspective

I first traveled to the Philippines in 2015 for a solar project in Northern Samar, and was instantly charmed by the local culture and people. My initial visit evolved into a long-term adventure as I organized a yoga retreat in Mindoro and decided to live abroad indefinitely. Although I had an offer to teach yoga in Bali, I opted for a 6-week position on Siargao Island, which unexpectedly became a five-year stay until the Covid-19 pandemic altered travel plans.

Siargao, now bustling compared to when I arrived, remains a unique gem with its vibrant community and the warm hospitality of the locals. Navigating visa requirements in the Philippines is notably simpler than in many neighboring countries, like Indonesia, which is a plus for long-term stays. Connectivity on Siargao has improved but still varies, so remote workers should verify that it meets their needs. While the Filipino diet heavily features meat, and sourcing fresh vegetables can be challenging, the tropical fruits and local cuisine offer their own delights. The strong sense of community in Siargao, where locals and expats blend together makes it a truly special place. If you’re planning a move, be ready for an enriching experience deeply rooted in Filipino culture and hospitality.

Bottom Line

American citizens living in the Philippines have both special benefits and drawbacks. On the plus side, compared to the US, housing, food, and transportation are more reasonably priced due to the relatively lower cost of living. Expats find the Philippines to be a welcoming place because of the nice people and their great hospitality, and they may also enrich their experiences with the country’s lively culture and varied landscapes. On the other hand, obstacles including sporadic bureaucratic roadblocks, disparate infrastructure levels, and constrained healthcare options can be problematic.

Notwithstanding these difficulties, the Philippines offers a fulfilling experience because of its breathtaking natural beauty, vibrant feeling of community, and chance to fully immerse oneself in a diverse range of cultural experiences. The Philippines offers an amazing and rewarding expat experience for individuals who are prepared to embrace the local way of life and adjust to the peculiarities of living overseas.