2023-08-17 06:02:00
The Chinese soldier struggles to get up. After the battle once morest the Covid, the recovery is “tortuous”, to quote Wang Wenbin, a spokesman for the Chinese Ministry of Foreign Affairs. And following some back and forth, it’s hard to deny the difficulties as the country enters deflation, a clear sign of economic slump.
“China’s economic recovery will have to ride the waves and will experience a tortuous progress, with inevitable difficulties and problems”, the spokesperson also declared during a press briefing, while affirming that the country has never backed down from problems and lambasting Western critics, including Joe Biden’s comment that called the country a “ticking time bomb”.
The shaken Chinese economy: concern but no panic on the markets
“A small number of Western politicians and media exaggerate and exaggerate the periodic difficulties of China’s post-epidemic economic recovery. In the end, the facts will prove them wrong,” the spokesperson concluded.
Fragile real estate giants
For the economist Eric Dor, we must first remember that China is a “very heterogeneous continent country”, so we must remain cautious regarding any hasty conclusions. However, the lack of clarity in the statistics, the real estate problems, including the plight of developer Country Garden, reminiscent of the Evergrande disaster, and even the subprime crisis are signals that should not be taken lightly. Country Garden has also acknowledged that “at the present time, there are considerable uncertainties regarding the repayment of the bonds”. This has not failed to worry investors. “The real estate giants have left ghost towns, people find themselves with nothing, when they have paid for their real estate project, and they are afraid of police repression”, continues Éric Dor.
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“Finally, in a semi-didactic regime, we know that during an economic downturn, we tend to find external enemies to mobilize the people.”
”In addition, China is betting on the recovery of internal demand to compensate for the shortcomings in external demand and exports. But remember that with the absence of social security or pensions, in the current situation, people save a lot and this weighs on demand. And there is always this problem of an aging population. Growth continues to slow. It remains higher than in Europe, which is normal since it is still considered an emerging country, but deflation is a problem. The debt will weigh even heavier”, he adds.
It should also be noted that many Chinese are turning to the collaborative economy and the 300 or so chauffeur-driven transport applications that now exist in the country. A positive sign? Not sure, because this rush on applications would be due to growing unemployment.
“Germany is doing badly and suffers the most”
For the economist, the main disadvantage for Europe is at the level of exports. “Germany, which was the economic engine but which is doing badly at the moment, is suffering from the situation of the Chinese slowdown. She’s the first to suffer. She who is already struggling because her automotive industry is less competitive than that in China and adapting to electric is more difficult”, he underlines.
The relatively fragile advantage would be that a Chinese slowdown might curb the rise in energy prices, particularly this winter, if Chinese demand remains weak. “There might be a slight windfall effect. Especially since Saudi Arabia and Russia have reached an agreement to reduce their oil production and drive prices up. Russia’s withdrawal from the grain agreement is also an inflation factor. So that can mitigate an inflation factor,” he adds. But it would be expensive for European companies and exporting countries…
“Finally, in a semi-dictatorial regime, we know that during an economic downturn, we tend to find external enemies to mobilize the people. Taiwan might pay the price,” he concludes.
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