2023-08-21 12:28:17
For many observers you meet in Shanghai these days, whether managers, sinologists or lawyers, China in 2023 is a new country. They were used to ascension China racing from success to success, producing growth rates year after year that the rest of the world looked on with envy. Whoever came wanted to be part of this party.
Gustave parts
Economic correspondent for China based in Shanghai.
Alexander Wulfers
Editor in the economy of the Frankfurter Allgemeine Sunday newspaper.
The China you are experiencing now is different. The political climate has become much rougher for a long time. Now the economy is also seriously faltering. And the question arises: is what we are seeing the logical consequence of increasingly authoritarian politics? Or the demystification of the Chinese economic model itself?
The data from the People’s Republic are a cause for concern for many. US President Joe Biden speaks of a ticking time bomb. Economists slash their growth forecasts for China, imports and exports collapse. In July, consumer prices slipped into deflation. Foreign direct investment in the second quarter was the lowest since the Bureau of Foreign Exchange began surveying it in 1998. Shadow banks and real estate groups are wobbling, the important real estate group Evergrande applied for bankruptcy protection in the USA on Friday. According to media reports, China now has to sell dollars to support its own currency on the world markets. The first rating agencies are publicly considering downgrading the country’s creditworthiness.
Youth unemployment will remain secret in the future
The government no longer wants to publish youth unemployment figures. Most recently, it was more than a fifth in the cities. But only those who are looking for a job are considered unemployed. If you add the 16 million young people who don’t even search anymore and instead run the household chores for their parents, almost every second Chinese person between the ages of 16 and 24 is unemployed, as a Beijing researcher has calculated. Bar and café owners tell of highly educated young people with master’s degrees who have written so many unsuccessful applications that they are now hiring as baristas.
A debate has flared up among economists about the causes of China’s weakness. Two camps have emerged, with very different explanations.
One cites politics as a reason. The authoritarian course of the communist party under Xi Jinping leads to uncertainty. First Xi took action against corruption, then he took on the tech companies and the real estate industry. For most people, all this was far away in everyday life and many probably even liked it. But with the rigid Covid measures, it became clear to them how mercilessly the state apparatus can take action against them.
This is how Adam Posen argues in the specialist magazine “Foreign Affairs”. The President of the Peterson Institute for International Economics attests China “economic Long Covid”, others speak of “psychopolitical fear” that has gripped the country. As a result, the savings rates of private consumers are increasing, companies are investing less and are more reluctant to hire new people. The trade and chip conflict between the US and China does the rest.
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