As the drama of the US election unfolds, China's Third Plenum has attracted less attention but is equally significant. The summit, held only twice a decade, recently concluded in Beijing with a memo praising President Xi Jinping's leadership. However, the forum failed to address the pressing issues troubling China's economy, such as slowing growth, property market collapse, and low consumer spending.
China's economic woes stem from a longstanding imbalance in its economy. Despite being the world's largest factory and significant exporter, China has struggled to boost household consumption leading to a heavy dependence on investments. The aftermath of the global financial crisis saw Beijing increasingly relying on investment and stimulus measures to maintain economic growth, resulting in massive infrastructure projects and a real estate bubble that is now imploding.
The consequences of China's economic imbalance are evident in its trade figures and commodity markets. The country's trade surplus hit a record high, setting the stage for potential trade conflicts with the US. The downturn in China's property market has led to a drop in steel demand, impacting countries like Australia heavily reliant on iron ore exports. Furthermore, as China gears up to increase iron ore production, global prices are expected to decrease, affecting not only China's trade partners but also its diplomatic relations.