China’s economy is slowing down. And, India must watch out

Chinese economic statistics are unreliable. But now, those, along with other indicators, paint an unflattering picture of the economy. In May 2021, the government revised its population data from 2011-19, adding approximately 10 million births over the eight years. In November, it again changed data from 2000-2010, adding 11.6 million births. Falling birth rate is one of the worries for planners — and adding 20 million “additional” births is convenient. With opaque authoritarian regimes, official announcements can sometimes be a good indicator of what’s being hidden — in this case, a gradual greying of China, which could reduce its economic potential.In 2021, China cracked down on real estate, EdTech, and technology firms. The crackdown on the first two could be linked to demographic concerns. China’s President Xi Jinping said that houses are for living, not speculation, and the government has taken several steps targeting the flow of capital into this sector. Unfortunately, this has resulted in ghost towns and widespread problems. Several real estate firms, including Evergrande, Shimao, and Kaisa, have defaulted on their offshore bond repayments.The sector’s troubles are partly linked to the government’s efforts to bring down real estate prices because the young were finding it difficult to buy houses. For now, the move seems to be succeeding. House prices in China have begun to fall, though the actual extent of the fall may be substantially larger. The sector accounts for a large chunk of China’s Gross Domestic Product (GDP) — an estimated 25% — and land sales to realtors form a substantial part of local government incomes.China’s access to overseas capital is also declining. The crackdown on Alibaba and other tech majors is making foreign investors rethink. Didi Chuxing, China’s Uber, listed on the New York Stock Exchange (NYSE) in mid-2021 and is now planning to delist from NYSE, following changes in China’s financial regulation. China has passed a data protection law, which makes it difficult to get information that is publicly available in the rest of the world. This includes the location of ships, information on coal use, and inventories of industrial goods, making it even more challenging to form an accurate assessment of the economy. The crackdown on Alibaba, Didi, and other private enterprises is also being felt. Alibaba and Tencent are no longer among the world’s 10 most valuable companies while the number of Chinese firms worth over $100 billion has also fallen. Expect innovation and growth to slow.China’s external footprint is also declining. Sri Lanka and Pakistan, both part of the Belt and Road project, are facing an economic crisis, largely due to Chinese overreach and domestic mismanagement. Pakistan has approached the International Monetary Fund for a bailout, while Sri Lanka has drastically reduced the import of fertilisers and automobiles, and is paying for oil imports with tea. The money tap from China appears to have shut.With the economy much weaker than what Beijing would like to project, the risks for India and other countries that share land or a maritime boundary with China have increased. The Chinese Communist Party makes a big deal about the century of humiliation and how it has made China strong against foreigners. A dispute with a smaller neighbour can be an excellent way to drive home the message. If China perceives that it can no longer expect to overtake the United States, it will become more belligerent in the short-term, especially on its ever-increasing list of “core interests”. The ongoing crisis in Ukraine and the West’s ineffective response so far may embolden China further. Even though this analysis is based on limited information, India must be prepared. Even a declining China has significant economic and military advantages over India, and will be a formidable threat.Amit Bhandari is senior fellow for energy, investment and connectivity studies, Gateway House The views expressed are personal