2023-08-23 13:50:00
The slowdown in activity and Beijing’s recovery plans, particularly in the automotive sector, will have repercussions in the European Union.
By Philippine Robert
© Ludovic Maillard/MaxPPP/PhotoPQR/The Voice of the North
Published on
Dthem worlds. At the end of July, the European Central Bank (ECB) announced a new rate hike to curb inflation. In China, it is quite the opposite. Earlier this week, Beijing announced another rate cut to stimulate a struggling economy.
Deflation, falling exports, youth unemployment at its highest… For several weeks, negative signals have been multiplying. Above all, the difficulties of Chinese property developers – Country Garden and Evergrande – have caused panic in the markets in recent days. But what will be the real impact of these shocks on the European economy?
Deflating the real estate bubble
While everyone has their eyes on real estate developers, the risk of global financial contagion of the “Lehman Brothers” type is rather limited, due to a Chinese market that is still relatively closed. “And even if some investors are concerned, like Blackrock, the overall exposure is rather low,” explains Patrick Artus, economic adviser at Natixis.
READ ALSO“China is doing everything to hide a structural economic slowdown”
The difficulties of these giants are above all one more indication of the worrying state of health of China, victim both of a structural landing of its economy and of the slow deflation of the real estate bubble. A fact known for a long time… But which had been somewhat forgotten in the euphoria of the post-Covid recovery. “At the start of the year, growth forecasts were revised upwards: they were probably a little too optimistic,” said Victor Lequillerier, economist at BSI Economics.
The EU undermined by inflation
A slowdown that will inevitably have an impact in Europe. When the engine of world growth, which captures 4% of European Union exports, stops, we cough. Among the most exposed countries in the EU: Germany, France and Italy, which sell capital goods, cars or pharmaceuticals to Beijing.
Another indirect effect, “China’s recovery plan focuses on the automotive sector, and might increase, which risks widening the gap with Europe even more on electric vehicles”, worries Victor Lequillerier. .
READ ALSOEurope: why inflation will last “Especially since with the inflation that has been undermining Europe for many months, price competitiveness has become even more distorted in favor of China,” adds Charles-Henri Colombier, economic affairs director at Rexecode. Over the past two years, producer prices for the manufacturing industry have jumped 20% in France while they have fallen by 3% in China.
The only good news in this gloom: the price of oil, which has already started to falter with the Chinese difficulties, might stop its rise, or even plummet. According to the International Energy Agency, China should indeed account for 70% of the increase in demand for barrels this year. A forecast that might prove to be far too optimistic, to the delight of motorists.
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