As the rest of the world teeters on the brink of recession, the last thing Western policymakers want is for China, the biggest driver of global economic growth since the 2008 financial crisis, to have a lopsided recovery. But that is what is unfolding, DW reported.
China’s imports contracted sharply in April by 7.9 per cent, while exports grew slower at 8.5 per cent compared to 14.8 per cent in March. Consumer prices rose at the slowest pace in more than two years in April, while factory gate deflation, prices offered by China’s industrial wholesalers, deepened. Meanwhile, new bank loans tumbled far more sharply than expected in April, with lenders extending 718.8 billion yuan (USD 104 billion/EUR 94.5 billion) in new yuan loans in the month, less than a fifth of March’s tally.
“China’s economy is not about to implode but it is not roaring back to the golden decade of the 2010s when it grew at a double-digit level,” Steve Tsang, director of the China Institute at the London-based School of Oriental and African Studies, told DW.
A strong rebound from China would help offset an expected slowdown in other parts of the world, spurred by monetary tightening policies by central banks over the past 12-18 months.
But those past stimulus measures have left China mired in a mountain of debt. In March, the International Monetary Fund (IMF) warned that Chinese local government debt alone has risen to a record 66 trillion yuan, equivalent to half the country’s GDP.
Tsang said those Western policymakers praying for China to revive their economies now will need to “look at the new political and economic realities without tainted glasses.”
“In terms of Taiwan, rising tensions or war would lead to a seismic shift,” Pushan Dutt, professor of economics at INSEAD business school in Singapore, told DW.
“Multinational companies would exit China, its export markets will get closed off and sanctions will be put in place,” he added.
“The assertive foreign policy that Chinese President Xi Jinping has imposed caused the US and other Western countries to start to decouple or de-risk in their economic links with China, meaning that a key factor that had previously supported rapid growth in China is weakening,” noted Tsang.
“China has been trying to engineer a shift from being a low-end manufacturer to becoming dominant in the industries of the future (artificial intelligence, robotics, semiconductors, etc.),” said Dutt.
As it moves away from heavy industries dominated by state-owned companies toward innovation and domestic consumption, a slowdown in growth is a “natural corollary,” he added.
Tsang told DW that while Xi clearly wanted the Chinese economy to become more dynamic, vibrant, strong and innovative, “his policies often deliver the opposite effect.”
While slowing Western demand will continue to negatively impact Chinese exports, the domestic economy still has plenty to cheer about, especially due to the pent-up demand from three years of COVID lockdowns.
“Chinese consumers have accumulated USD 2.6 trillion of excess savings during the pandemic, Dutt told DW. “So expect the services sector to pick up the slack in the short term.”
(ANI)
