2023-10-07 18:19:13
China, the world’s second-largest economy and a country of 1.4 billion people, faces a host of complex economic problems. Economic growth is slow, youth unemployment rates are high, the real estate market is in chaos, and corporate economic debt is piling up.
These problems appear similar to those in many economies in the world, yet the international media continues to highlight China’s economic headaches. Of course, part of this focus must be understood in the context of the ongoing conflict between China and the United States in recent years, but also another large and important part is due to real global concerns that if Chinese policymakers do not act quickly and forcefully to stop the decline in domestic, regional and international confidence in the Chinese economy, The repercussions resulting from what happens there may spread to the rest of the world’s economies.
Although the United States will be less vulnerable than Europe, Asia, and commodity-producing emerging markets to a deterioration in the Chinese economy, given that the American economy is primarily driven by domestic consumption and does not depend on selling goods to China, this does not mean that the United States is immune. From the repercussions of the Chinese crisis, and then if Chinese policymakers fail to act quickly and find real solutions that lead to economic stability and dismantle the set of problems facing the country, the international community will be affected, albeit to different degrees.
For his part, James Cleverly, a researcher in the Chinese economy, believes that fears of a global economic catastrophe as a result of the economic crisis in China may be exaggerated, but the Chinese crisis could have a “domino theory” effect in the international economy.
He told Al-Eqtisadiah, “Many international companies and multinational companies, such as car companies Mercedes and Volkswagen, and electronic product companies such as Apple and Samsung, have a large portion of their revenues coming from their sales in Chinese markets, and the decline in household spending in China will leave its effects on the production capacity of those companies.” Which will reduce its demand for many raw materials produced by emerging economies, and then any decline in consumption in China will have an impact on the global economy, but not to the point of recession.”
He added, “For an international economic recession to occur as a result of the decline of the Chinese economy, Chinese growth rates must be very low or negative, and this is unlikely in the short term.”
China is of course aware of the seriousness of the situation and how failure to quickly resolve its economic problems could impact its global standing. This prompts the Chinese leadership to work hard to dismantle the set of challenges it faces by defusing the financial risks resulting from the accumulated debt burdens on the balance sheets of local governments, and to work to stimulate the local economy to restore the confidence of companies and consumers.
In the wake of US President Joe Biden’s statements in which he described China’s economic problems as a “time bomb,” international investors withdrew more than ten billion dollars from Chinese stock markets, and most of the selling was in shares of leading companies, which prompted Goldman Sachs Group and Morgan Stanley to reduce their expectations. for Chinese stocks.
For his part, Simon Fox, a financial analyst at the London Stock Exchange, told Al-Eqtisadiah, “Asian economies are receiving the biggest trade blows due to China’s economic situation, followed by African countries. Japan was also affected by the decline of the Chinese economy. Last July, its exports declined for the first time in two years after… “China reduced its purchases of cars and electronic chips, and the central bank governors of South Korea and Thailand lowered their economic growth expectations as China’s growth expectations declined.”
He added, “But the matter is not all evil. The decline in Chinese exports opens the horizon for European, British, and American exports, which enables these countries to strengthen their forces in the face of current inflation. Also, the departure of international capital from China may mean that they will settle in other places such as Vietnam, Indonesia, and India.” .
This point of view seems closer to the prevailing conviction among some experts that the contraction of the Chinese economy is not necessarily bad for the global economy. Rather, the danger is that if the major economies in Europe, the United States, and Canada slide into economic recession and the Chinese economy continues to suffer from low growth rates, then this will not represent It is not only a Chinese crisis, but a global dilemma, and there is no debate.
Some experts believe that, mathematically, China represents about 40 percent of global economic growth, and the prosperity of its international trade ensures that it achieves a huge global trade surplus, but what China exports is much greater than what it imports, and this means that Chinese economic growth benefits China. Only, not the international economy.
But this point of view ignores that the decline in Chinese spending on housing construction, for example, will lead to a decline in global demand for raw materials and basic goods, and a 9 percent decline in China’s imports of materials used in construction operations has led to huge damage in Australia, Brazil, and many African countries. .
But the economic problems facing China prompt banking expert Roland George to warn of the danger that the Chinese crisis will accelerate the outbreak of the global debt crisis, especially in emerging economies.
He told Al-Eqtisadiah, “It is likely that China will compensate for the withdrawal of foreign capital by withdrawing part of its foreign investments and redirecting them to its internal markets. Also, 150 countries have received Chinese money and technology to build roads, airports, seaports, and bridges, and therefore its commitment to these projects may decline.” Relatively speaking, if its internal problems continue, it will not have the financial generosity that can be pumped abroad.”
The risks of Chinese economic problems and their impact on the international economy do not stop at the borders of the commodity sector, whether imports or exports to China. The international services sector, especially the entertainment sector, could be significantly harmed. Consumers in China spend more on services such as travel and tourism than they spend on goods, but Travel is now much more expensive than it was before the Corona epidemic.
In 2019, Chinese travelers made 155 million trips abroad and spent $277 billion, one-fifth of the total global spending by international tourists. In December of last year, the Chinese government officially announced the possibility of Chinese travelers traveling abroad again, and this sparked optimism in the tourism industry. Which suffered greatly during the pandemic, and official figures revealed that foreign reservations during the first half of this year increased by 313 percent, and Singapore, Thailand, and Malaysia were among the most popular destinations.
However, overall passenger numbers still represent a small fraction of pre-pandemic numbers. Flora Stragon, head of the public relations department at Love to Visit, told Al-Eqtisadiah, “As it has the largest travel industry in the world, it will take some time for China to return to its full capacity, and until that happens, the world’s hospitality sector will continue to suffer.”
She added, “But perhaps the suffering is more evident in the United States, which could be the last to feel any recovery from the return of Chinese tourism to what it was before the pandemic. With the escalation of tension in relations between Beijing and Washington due to a countless number of issues, the Chinese media has exaggerated the The seriousness of anti-Asian hate crimes in the United States, and with the slowdown in the Chinese economy, the number of Chinese tourists to the United States is expected to decline, and the Chinese tourist has spent an average of $6,700 per trip to America.”
Some people believe that it is tempting to compare the global financial crisis of 2008 with the economic conditions that China is currently witnessing, as China is one of the major engines of global economic growth, and any defect in this engine will inevitably lead to stopping any part of the global economic cycle, whatever its size.
However, the tempting comparison may not be accurate sometimes, as China is the second largest economy in the world, but the degree of its influence in the global financial system is not comparable to the influence of the United States, which may create a state of relative comfort that the Chinese economic crisis may be disturbing to the stability of the global economy, but it will not be Equally devastating are the American economic crises.
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