Second largest economy
Trump on the approach: pressure on China’s economy
The Chinese economy is sputtering. Starting next week, Beijing will have to deal with Donald Trump again. Is there a threat of a new trade war like in his first term in office?
A simmering crisis in the real estate market, too little consumption, and now Donald Trump is returning to the White House. The Beijing Statistics Office announced that the official growth target of five percent was achieved last year with a perfect landing and that the mood brightened at the end of the year. But observers fear that the second-largest economy will remain in difficult waters for the time being. Many German companies also have to prepare for the fact that their dry spell in the Far East will continue.
Modernization should be pushed forward
There is headwind from several sides. For many Chinese people, most of their wealth is stored in their homes. But real estate prices have recently fallen sharply because the financial problems of major developers triggered a crisis of confidence. That’s why people spend less on other purchases.
Beijing did do a lot to stimulate the economy. That’s why growth from October to December was 5.4 percent, higher than in the previous quarters. However, the real priority of economic planners remains different: the country should continue its modernization.
Future industries are specifically supported so that new global market leaders can emerge quickly. China wants to further advance its technological independence in order to better protect itself from further restrictions and punitive measures from the USA.
No significant improvement expected
“A significant improvement in the economic situation in China is not expected in 2025 either,” says economist Max Zenglein from the Merics China Institute in Berlin. Especially since Donald Trump and his team could further increase the pressure on Beijing compared to the Biden administration.
The US President-elect had already announced in December that he would impose new tariffs of ten percent on Chinese goods on his first day in office. This would further burden China’s foreign trade and thus an important pillar of growth.
Especially since many observers expect that a tariff spiral could start if Trump puts his threats into action. China would respond to any US action with counterattacks. Such a trade war had already occurred during Trump’s first term in office.
German companies fear repercussions
As was the case back then, German companies are now very nervous. “German companies in China are looking forward to the new year with subdued expectations,” says Oliver Oehms, executive board member of the German Chamber of Commerce in North China.
A third expect the economic situation to worsen compared to the previous year. The main headaches are the sluggish domestic demand, the tough competition with increasingly strong local companies and the resulting price pressure in the market.
Risks are difficult to calculate
“This constellation is accompanied by risks that are difficult to calculate, above all the trade conflict between China and the USA and the feared increase in trade barriers worldwide,” says Oehms.
Despite the difficult situation, many German companies would continue to invest in China and expand existing local capacities, for example in the area of research and development. After all, they don’t want to lose touch with this relevant market. The companies hoped that Beijing would step up and take more measures to promote consumption.
Will Beijing provide further aid?
That doesn’t seem to be completely out of the question. For China, as a large economy, domestic consumption is the basis for maintaining growth, says Yang Ping, director of investment research at the Institute of Macroeconomics of the Beijing Reform and Development Commission.
According to the government’s economic expert, we are prepared for Trump. “Even if he implements a series of unfavorable or bad changes, we have past experience and our basis of control and regulation,” she warns Washington. Because China sells much more to the USA than vice versa, it initially has the short end of the stick in a tariff dispute.
But other retaliatory measures also seem possible. The Chinese dominate in the supply of rare earths, metals that are also very important for many US tech companies. Beijing could also consider making life more difficult for US companies in the Chinese market.
dpa
Source: Stern
