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The Chinese engine seizes up!  - Economic policy

The Chinese engine seizes up! – Economic policy

Apple has announced that it will transfer a number of its production plants for its new iPhone 14 to India in order to diversify its production chains outside Chinese borders.

Since the congress of the Chinese Communist Party on October 16, Xi Jinping has been strengthened since his third mandate (an exception since Mao) gives him a real aura and power. But the flaws exist.

Since the congress of the Chinese Communist Party on October 16, Xi Jinping has been strengthened since his third mandate (an exception since Mao) gives him a real aura and power. But the flaws exist. China has a big demographic problem: in 2013, the number of annual marriages reached its highest level with almost 13.5 million unions. In 2021, it dropped to 7.6 million. As Xi Jinping begins a third term, this demographic crisis poses a major challenge for the decades to come. And economically, China’s growth will be weaker than other Southeast Asian economies for the first time in 30 years. According to the new forecasts of the World Bank, it would only reach 2.8%, against 5.3% on average for the other economies in the region. The damage caused by the zero covid policy and by the collapse of the Chinese real estate market (the largest in the world) is more than sensitive. But for now, the pandemic rebound is arguably its biggest challenge. More than 2,000 new daily cases of covid have been confirmed in recent days. Shanghai and Shenzhen are stepping up screening tests on the population, while this rebound is forcing authorities to close some schools and tourist spots. Xi’s zero covid strategy to regain health confidence and restore the chipped image is challenging Chinese exports and helping to reorient, re-diversify, even relocate, certain sectors in our countries and continents. Since the beginning of the 21st century, European companies had nevertheless largely developed their activities in China. But the zero covid policy, coupled with a drop in Chinese growth and rising geopolitical tensions, has profoundly affected the development pattern of European foreign direct investment (FDI) in China. As proof: a survey last April shows that 75% of European companies questioned have suffered a negative impact from containment measures, 85% report difficulties in obtaining raw materials and 89% difficulties in transporting them. Surveys show that closer cooperation between the United States and China would be vital to improving the investment environment. But the repeated crises around Taiwan complicate things and the American midterm elections (announced against the Democrats) are not setting the right pace. The German Chamber of Commerce in China strongly encouraged Chinese and European leaders to send positive signals at the EU-China summit last April by contributing to world peace. Is it thinkable? In any case, this explains a certain Chinese exasperation with the Russian adventure in Ukraine. Apple has announced that it will transfer a number of its production plants for its new iPhone 14 to India in order to diversify its production chains outside Chinese borders. A choice motivated by geopolitical tensions but also by major supply problems for foreign companies. In short, the Chinese environment is seizing up. Xi has confirmed his participation in the Asia-Pacific Economic Cooperation summit to be held on November 18 and 19, but Joe Biden will, for his part, be absent from this meeting because he will attend the wedding of his granddaughter Naomi. A false coup rumor put Xi under severe strain ahead of the CCP congress. This seizure in progress could weaken it even more!

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