China posted its weakest economic growth since the global financial crisis ten years ago. An unsolvable Problem that is not. Because the cooling is mainly done in-house, says Frank Sieren.
Once again, the Worries are great. We are heading straight to witness how the “global economic locomotive China” to their inevitable Crash and us in the abyss of tears? The second largest economy in the world grew this year as slowly as since the peak of the global financial crisis of 2008. In the first quarter, the gross domestic product grew 6.8 percent, the second 6.7 percent. But last Friday, the Bureau of statistics reported in Beijing for the third quarter, a growth of 6.5 percent.
If you have to, is a matter of opinion. Because Overall growth is still above the default of the government of about 6.5 percent for the year as a whole. A value so that most countries can only dream of. Industrial production fell in September, with an increase of 5.8 percent, although slightly lower than expected, retail sales in the same month more than planned. Similarly, the investment flows to China, which rose during the first half of the year, to six percent to 70 billion dollars. Also, the external trade remained robust, possibly because China’s export wanted your come the consequences of the trade dispute with the United States.
The effect of the punitive duties is
The majority of the mutually imposed punitive tariffs has only been the past month. Therefore, the statistics are not yet detectable. Beijing, however, already of the “psychological impact”: Since January, the Shanghai stock market has fallen by about 30 percent, the Yuan has depreciated by nine percent to the Dollar. The reason is that Chinese consumers are confused. Passenger Car sales in the largest car market in the world fell in September for the third Time in a row – the first decline in three decades. However, this is also the transition to electric mobility, which many buyers will still be watching expectantly.
In China, customers still wait with the purchase of E-cars
In this uncertainty, the US rating Agency S&P jumps up by warns of “huge” debts, which have amassed in particular, China’s local governments. The risk that arises from this is smaller than it looks on the first glance, because China’s total government debt remains low in an international comparison. Most of the debts are from state-owned enterprises that have received loans from Chinese banks. Foreign debt China has. A big difference to countries such as Thailand and South Korea, as this lapse in 1998 in the Asian crisis. Japan is a very much higher domestic debt been stable for decades.
Homemade causes of the decline
The reasons for China’s slowdown in growth are mainly made in house, and thus easier to control: Beijing is going for two years, becoming stronger against shadow banks and is working to strengthen its efforts to reduce its debt. That slows down growth, makes the financial system stable over the long term. Add to that: The most populous country in the world is still in transition from a manufacturing export economy to a service-oriented domestic economy.
Still not data in the economic consequences of the mutual punitive tariffs
The trade dispute is a burden, but not one that will force China to its knees. The Communist party must keep the growth with new infrastructure projects In the country and abroad on the Run. More financing for small and medium-sized enterprises, lower interest rates on loans as well as tax relief for the export industry are likely to. This costs the state money. Also, the financial and budgetary policy is likely to continue to be relaxed. The reserve requirements for major banks were lowered by one percentage point to 14.5 and for smaller banks to 12.5 percent. More liquidity means more boost for the economy. Thus, Beijing wants to intercept the burdens of this war.
Balance-Act
Growth and debt reduction balance is not easy. However, Beijing knows that the basic conditions are good. Yi Gang, Governor of the Central Bank, said that China’s stock market downturn of the past few weeks constituted an Overreaction and the potential for growth in the country remains “extremely strong”.
DW-columnist Frank Sieren
Guo Shuqing, China’s chief banking supervisor, agreed with him: The fluctuations would not be “the fundamentals of China’s economic development in line”. That sounds like slogans, but it is a quite realistic assessment.
In the past 25 years, it has happened 17 times, that China’s stock markets have lost over a longer period of more than ten percent. It must not be forgotten: The assets of China’s growing middle class continues to grow, with double-digit Rates. Even if the overall growth is slowing, this Trend until further notice unbroken. It must succeed in Beijing, however, to allow the increasingly rich population of greater diversification of their assets.
Chinese citizens are looking for investment opportunities
Many Chinese, of whom not a few have come to stand as the first for generations to be comfortable, try to create your money abroad in order to spread it wider. In this context, it is likely to see the establishment of a employee of the Swiss UBS Bank at the end of last week. The capital export controls in China are very strict. Per capita, a Chinese person is allowed to export only 50,000 US dollars a year. Beijing wants to prevent large sums of foreign asset managers such as UBS, will leave the country and so the Chinese economy is deprived. Chinese to invest in China, is the motto. The Chinese, however, ask yourself: where? The stock market has fallen. The real estate market is overheated.
There is, therefore, to advise a lot, if the leadership in Beijing in December to define together the strategies for the next year. The full-year target of 6.5 percent for 2018, China is on track to achieve. What is the impact of the trade dispute with the US has on the Chinese economy, we will be able to see in the next few quarters. However, another important Meeting before: at the end of November, U.S. President Donald Trump and China’s state and party chief Xi Jinping want to discuss on the sidelines of the G20 meeting in Argentina over a trade conflict. Well possible that the Problem is again out of the world and the Chinese, as before at a high level, invest, and consume. Because: While the income and wealth stagnate in the industrial countries, in China is still a lot of room upwards.
Our columnist Frank Sieren has lived for more than 20 years in Beijing.