Expected Conflict in China
"War Games: Assessing the Probability of Conflict and Its Impact on China"
Continuing from the previous episode, today we will explore the probability of China starting a war and the economic and political implications that would follow. We will also take some time to consider the factors to be taken into account if China initiates a war and think about the aspects we should prepare for.
China was initially an indispensable presence in the manufacturing industry, to the extent that it was called the "world's factory" in the global economy. However, China now not only holds the position of a manufacturing powerhouse but also wields significant political, economic, and international influence.
A striking example is China's defiance against the US petrodollar. To create cracks in the petrodollar system, China has been actively pursuing transactions with Russia, as well as Middle Eastern countries, using the yuan and has achieved some success.
Although still relatively small in scale, accounting for only 2-5% globally, the status of the petrodollar is no longer the same as before, as the US continues to raise interest rates, leading to dissatisfaction in various countries, including Mexico.
China has a significant impact on the global economy, with its economic size and growth rate continuing to increase. It holds a crucial position in international organizations and plays a major role in trade.
Additionally, China has a significant influence on global politics and competes with major countries. While facing economic challenges and various model-related issues, China continues to pursue growth and innovation.
Xi Jinping holds the highest leadership position in China and bears the responsibility for making important decisions. However, given the ongoing long-term leadership process of Xi Jinping, political and economic uncertainties weigh heavily on him.
Currently, China's youth unemployment rate has surpassed 20% as of May 2023, indicating significant economic instability. Furthermore, the manufacturing sector is showing a downward trend.
Moreover, the withdrawal of foreign institutional investors from the Chinese bond market, amounting to approximately 20 trillion won in the first quarter of this year alone, continues.
Last year, more than 142 trillion won left China, including consecutive net outflows from January to October. This is interpreted as a "decoupling" that excludes China from the US-China conflict and industrial connections, with the US attitude having an impact.
Due to the complex relationships between these factors, many US generals and experts have warned that if a conflict arises between China and Taiwan or any spark is ignited, a war could break out on the Korean Peninsula within the next three to four years. This is because war can enhance political influence. However, due to the uncertainties and risks associated with war, cautious judgment is required.
It is expected that Xi Jinping will make decisions in a direction that benefits China's stability, national interests, and his own political power. China is in a competitive relationship with neighboring countries in the Northeast Asian region.
Such regional tensions can increase the possibility of war. When considering the prospect of war, China needs to consider diplomatic efforts with international relations and neighboring countries.
In the past, China has conceived the strategy of "Belt and Road Initiative" as a means to surpass the US and Europe rather than relying solely on maritime routes. This method incurs higher costs than maritime routes. However, apart from land routes, China feels threatened by the transportation of food and energy to the US and other European countries.
For this reason, China has been making efforts to open up land routes through "Belt and Road Initiative" exploration for a long time.
The situation currently is such that the US, similar to the Plaza Accord it made with Japan in the past, is continuously pressuring China with interest rate hikes and economic disadvantages, ultimately cornering China.
In response, China has already stopped purchasing US bonds for more than a decade and is making efforts to form cartels with other countries.
From our perspective, we are in a difficult situation where we are caught in between. We hope that through appropriate judgments from the political and economic sectors, we can make choices that are most beneficial to our national interests and create a country where future generations can live well.
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