China’s economy in big trouble amid fears Israel conflict could ramp up new anti-West axis

China‘s economy faces challenges in the global market, with external demand likely to weaken in the coming months. Despite this, advanced economies are still courting China, as highlighted by the upcoming EU leaders’ summit in Beijing next month. The EU’s approach is focused on de-risking rather than de-coupling, despite concerns about the strategic risks of economic dependence on China.

Marc Sidwell, Director of Research at the Henry Jackson Society, emphasised the global perspective on China’s economic challenges. Speaking to Express.co.uk, he noted that despite China’s disappointing post-COVID economic results, advanced economies are still engaging with China.

He also highlighted the potential development of a new anti-Western axis between Iran, Russia, and China, as evidenced by China’s alignment with Iran and its stance on Palestinian issues.

He said: “Despite China’s own economy having disappointing post-COVID results – advanced economies are still courting China. The EU’s leaders are flying to Beijing next month for a summit. Talk in the EU is still of de-risking rather than de-coupling. After the disaster of becoming hooked on cheap Russian energy, Europe needs to take a harder look at the strategic risks of economic dependence on China.”

Asked whether China’s economic difficulties have affected its stance on ongoing geopolitical tensions in the Middle East, he replied: “Despite its economic woes, China is still determined to establish itself as a key player on the global stage. However, it appears to have backed the wrong horse in the Middle East, brokering the restoration of diplomatic relations between Iran and Saudi Arabia earlier this year. The horrific attacks by Hamas on October 7 have only pushed these two powers further apart, emphasising Iran as a threat to regional peace, while failing to derail US talks with the Saudis.

“China’s willingness to take the side of Iran and make excuses for Palestinian terrorism also draws a sharp line between it and the West, and will add to fears that a new anti-Western axis is developing between Iran, Russia and China.”

Nonetheless, China’s economic challenges persist as its exports declined for the sixth consecutive month in October, raising concerns about the country’s economic recovery. The decline in exports, which amounted to a 6.4 percent drop from the previous year, reflects ongoing weak external demand and a fragile overall economic situation. Meanwhile, imports showed unexpected growth, expanding by 3 percent during the same month.

These economic trends are indicative of the challenges China is grappling with, despite a series of policies implemented to stimulate economic growth. The property market slump and rising local government debt pose significant risks to the nation’s economic stability.

Xu Tianchen, an economist with The Economist Intelligence Unit, pointed out: “Export data indicates uncertainties regarding the recovery of external demand.” While the increase in imports suggests a potential rebound in domestic demand, it is expected to be moderate due to a weak exchange rate.

Notably, imports of soybeans, crude oil, and coal saw substantial increases in the first 10 months of the year. However, even as China seeks to boost its economy through domestic demand, it faces challenges in the global market, with external demand likely to weaken in the coming months.

China’s total trade surplus for October amounted to $56.5billion, down from $77.71billion in September. Zhang Zhiwei, President and Chief Economist at Pinpoint Asset Management, said: “China has to rely more on domestic demand to boost growth.”