2023-05-16 03:49:00
The slowdown in the Chinese economy has multiple factors.
Beijing’s massive stimulus program helped the West recover from the 2008 financial crisis. This time, however, China’s post-crisis recovery is uneven.
As the rest of the world teeters on the brink of recession, the last thing Western policymakers want is for China, the biggest engine of global economic growth since the 2008 financial crisis, to have an uneven recovery. But that is what is happening.
After abandoning his policy of three years of zero in December COVID, the world’s second largest economy is not exactly running at full capacity. Chinese imports contracted sharply in April, down 7.9 percent, while exports grew at a slower pace, reaching just 8.5 percent. Meanwhile, new bank loans fell more sharply than expected, with lenders extending 718.8 billion yuan ($104 billion, 94.5 billion euros) in new loans in the month, less than a fifth of March’s figure. .
Is China’s golden age over?
“The Chinese economy isn’t about to implode, but it’s not going back to the golden 2010s, when it was growing in double digits,” Steve Tsang, director of the China Institute at the School of Oriental and Chinese Studies, tells DW. Africans (SOAS), based in London.
Huge stimulus from China after the 2008/9 financial crisis helped the global economy recover, partly due to the Asian country’s insatiable appetite for importing raw materials for infrastructure projects. But those stimulus measures of the past have left China mired in a mountain of debt. In March, the IMF warned that China’s debt is 66 trillion yuanequivalent to half of the country’s GDP.
The Chinese threat to Taiwan isolates the Asian giant
The Chinese threat to invade taiwan, which Beijing claims as its own island, continues to antagonize the West. Beijing’s friendly ties with Moscow and neutrality in the face of Russia’s invasion of Ukraine are other contentious issues that have jeopardized global economic collaboration.
“As regards Taiwan, increased tension or war would cause a seismic shift“, tells DW Pushan Dutt, professor of economics at the INSEAD business school in Singapore. “Multinational companies would leave China, their export markets would be closed, and sanctions would be put in place.”
Besides, Trump-era trade tensions between Beijing and Washington have also persisted during the Joe Biden administration. The tit-for-tat tariffs led to US sanctions on several Chinese companies and officials. “Chinese President Xi Jinping’s imposed foreign policy caused the US and other Western countries to begin decoupling their economic ties with China, meaning that a key factor that had previously supported China’s rapid growth has is weakening,” says Tsang.
Beijing prioritizes “quality growth”
Another reason for China’s less-than-stellar recovery is Beijing’s strategic plan to move the economy up the value chain, prioritizing quality over quantity of growth. These reforms, however, take time. “China has tried to go from being a low-end manufacturer to dominating the industries of the future (artificial intelligence, robotics, semiconductors, etc.),” says Dutt, leading to a slowdown in growth.
In Tsang’s eyes, another factor hurting the Chinese economy is its leader, Xi Jinping, who clearly wants the Chinese economy to be more dynamic, vibrant, strong and innovative, but “his policies often have the opposite effect.” “With Xi clinging to power and not admitting his mistakes, it is virtually impossible for the technocrats in China to make the necessary adjustments to reinvigorate the economy,” he concludes.(ms/ms)
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