China's Economic Challenges Raise Concerns: Biden's Warning

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US President Joe Biden has delivered a stark warning about China's economic stability, dubbing it a "ticking time bomb" in light of its ongoing economic difficulties. Speaking at a private fundraising event in Utah, Biden emphasized that China's predicament could lead to undesirable outcomes. The president pointed to rising unemployment and an aging workforce as clear indicators that the country is facing substantial trouble.

During the event, Biden alluded to the potential consequences of such economic turmoil, suggesting that when troubled nations encounter difficulties, their actions tend to reflect their predicament. He stressed that he is not seeking to harm China but rather desires a rational relationship with the country, closely monitoring the situation.

The relationship between the US and China has been marked by tensions, as evidenced by Biden's previous reference to Chinese President Xi Jinping as a "dictator." This remark had been met with strong objections from Beijing, which characterized it as a "political provocation."

To address the strained relationship, US Secretary of State Antony Blinken embarked on a diplomatic mission to China, aiming to mend ties that had been deteriorating. These tensions were particularly evident following the incident involving a Chinese balloon that was described as a "spy" operation and subsequently shot down by the United States earlier in the year.

China's economic challenges have been manifesting in various ways. In July, the country's economy experienced deflation, coupled with declines in factory-gate prices. This downward trend in economic indicators has prompted concerns that China could be entering a phase of sluggish growth, characterized by stagnant consumer prices and wages, which stands in contrast to inflationary trends observed elsewhere globally.

The recent data reveals that China's consumer price index, a crucial measure of inflation, declined by 0.3% in July, following a flatline in June. This deflationary trend underscores the weakening state of the Chinese economy, which has far-reaching implications for European companies and economies due to China's significance as a major trading partner.

This marks the first instance of negative inflation recorded in China since the early stages of 2021 when the global impact of the Covid-19 pandemic prompted weakened demand and subsequently, a decline in prices, particularly pork prices.

In contrast, the United States, boasting the world's largest economy, has confronted high inflation levels while maintaining a robust labor market.

In response to these challenges, President Biden recently signed an executive order aimed at restricting new US investments in China's sensitive technologies, including computer chips and AI. China, possessing the world's second-largest economy, expressed grave concern over the order, asserting its right to countermeasures in the face of this development.

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