2024-11-04 09:11:00
LAmerican voters will not be the only ones glued to their television screens, on the night of Tuesday November 5 to Wednesday November 6, to follow the results of the presidential election. On the other side of the planet, Chinese deputies will not miss a beat. The result in Washington should indeed directly influence the decision they will have to make.
This first week of November sees the meeting of the standing committee of the National People’s Assembly, the supreme body of Parliament. His task: to decide, by Friday November 8, the amount of the economic stimulation plan. However, a victory for Donald Trump could have a considerable impact. If the Republican candidate were elected and implemented his promise to tax products imported from China, it could have catastrophic consequences for the country.
In a note published in July, the bank UBS calculated that if the tax planned by the candidate of at least 60% were applied on all products coming from China, this could halve the country’s growth. year of its implementation, i.e. 2.5 points of growth.
Consumption is slipping
Long reluctant to support his lame ducks, particularly in real estate, Chinese President Xi Jinping only recently decided to draw the classic weapon of the recovery plan. . His idea was rather to promote high technology in order to catch up with America on its favorite terrain. And to overtake the United States as the world’s largest economy in 2035.
He also wanted to avoid falling into the real estate trap that paralyzed Japanese growth for thirty years. He therefore pushed for investment and exports in electronics, solar energy, electric cars, materials, etc. But Chinese citizens see things differently. Many have been ruined by the explosion of the real estate bubble, consumption is slipping, youth unemployment is not weakening and local authorities are in great financial difficulty.
The Chinese government is discovering that everything is linked: exports and domestic consumption, high technologies and traditional industry. The plan voted by parliamentarians, which could, according to analysts, reach 2,000 billion yuan (259 billion euros), will above all help indebted local authorities and make it possible to recapitalize the banks. This will not be enough to restore morale to Chinese consumers. Will major works need to be relaunched as during the 2008 financial crisis? Mr. Xi, educated in the Japanese counter-example, is resisting this temptation. Donald Trump will perhaps help him take the plunge.
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**Interview with Dr. Mei Lin, Economist and China Expert**
**Interviewer:** Good morning, Dr. Lin. Thank you for joining us today. As we approach the U.S. presidential election on November 5th, how do you see strong U.S. jobs data impacting the Chinese yuan and the broader Chinese economy?
**Dr. Lin:** Good morning, and thank you for having me. The strong U.S. jobs data is likely to exert pressure on the Chinese yuan. When the U.S. economy shows strength, investors typically shift towards the U.S. dollar, seeking stability and better returns. This could lead to a depreciation of the yuan, especially as we are observing sluggish consumption and challenges in the Chinese economy.
**Interviewer:** Interesting. And with the impending election, how crucial is the outcome for China?
**Dr. Lin:** It’s absolutely critical. If Donald Trump emerges victorious and follows through on his pledge to impose high tariffs on Chinese imports, as we saw in 2016, it could severely impact China’s economic growth. UBS estimates that such tariffs could lead to a decline of 2.5 percentage points in growth within the first year, essentially halving China’s annual growth rate.
**Interviewer:** What steps is the Chinese government taking to mitigate these potential impacts?
**Dr. Lin:** President Xi Jinping has recently pivoted towards implementing more traditional economic stimulus measures, focusing on high technology and sustainable sectors like solar energy and electric vehicles. However, there’s a significant disconnect with the public—consumer confidence is low as many individuals have suffered from the real estate crisis, leading to a dip in consumption.
**Interviewer:** So you’re saying the citizens’ sentiment is a concern for the government right now?
**Dr. Lin:** Precisely. Despite government efforts to stimulate the economy, the realities on the ground—such as rising youth unemployment and financial strain on local authorities—are hampering recovery efforts. The government faces a tough balancing act between promoting growth and addressing public discontent.
**Interviewer:** as the meeting of the National People’s Assembly approaches, do you think there is readiness to react quickly to the election results?
**Dr. Lin:** There is certainly urgency. The assembly’s decision on the economic stimulation plan by November 8th will be pivotal. Depending on the U.S. election outcome, the Chinese government may need to adapt its strategies rapidly to ensure stability and growth, especially if faced with aggressive tariffs.
**Interviewer:** Thank you, Dr. Lin, for sharing your insights. It will be interesting to see how these dynamics play out in the coming weeks.
**Dr. Lin:** Thank you for having me. It’s a crucial time for both the U.S. and China, and we’ll have to keep a close eye on the developments.
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