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In the context of a trade war with the US and a recession in the world economy due to the COVID-19 pandemic, Beijing is urgently looking for ways out of the crisis.
China will be the only major economy to end 2020 with GDP growth rather than a drop, even though the coronavirus pandemic started in that country.
Coming out of the coronavirus crisis, exacerbated by the trade war with the United States, China decided to radically reorient its economy. Correspondent.net says the details.
Technological power with a middle class
Now the global economy is experiencing a recovery spike from the quarantine crisis in the fight against the spread of the coronavirus pandemic, Bloomberg writes, citing experts.
In the face of the pandemic, governments have already invested billions of dollars in support measures. Thanks to this, in the United States in August, the unemployment rate dropped dramatically and the situation in the housing market improved, the economy is recovering in China, and production in Germany is growing.
In addition, emerging markets received “a respite” due to the falling dollar, the agency said.
However, it will not be easy to maintain positions, the experts warned. Authorities must redouble efforts to stimulate the economy, while many are already willing to suspend support measures introduced in relation to the pandemic, they noted.
The updated global macro forecast from rating agency Fitch suggests that as early as 2021, global growth will generally offset the decline due to the COVID-19 epidemic.
However, despite the improvement in overall estimates against the backdrop of a faster economic recovery from the crisis in 2021, only the People’s Republic of China will fully overcome the consequences of the recession.
China will end the second quarter of this year with GDP growth of 3.2 percent, in annual terms – 2.7 percent. That said, next year, Fitch expects the Chinese economy to rebound 7.7 percent.
In August, the Chinese government announced its intention to radically reorient its economy in the coming years. We are talking about reducing dependence on exports and moving towards stimulating domestic demand for Chinese products and services. The concept is called “internal circulation.”
Now, in China, where the spread of the coronavirus was localized a few months ago, consumers are still reluctant to spend money, with the largest banks reporting the maximum profit drop in more than a decade due to the growth of bad debts.
Beijing has been trying to train a middle class for many years to increase domestic consumption, but so far it has failed. In 2019, this figure in the People’s Republic of China was less than 40 percent of GDP, while in the United States it was 66 percent.
To stimulate domestic consumption, a significant increase in the purchasing power of industrial and industrial workers is required, writes the Chinese state publication Global Times.
The government will invest in infrastructure to bring China’s economic miracle and consumer goods to predominantly poor rural regions.
However, Commerzbank analyst Bernd Weidensteiner, who recently published a study on the subject, is skeptical of Beijing’s new vision.
“Large income disparities and demographic problems, in particular a shrinking working-age population, will impede the growth of domestic consumption, especially since due to the low level of pensions, the country’s residents will continue to try to save. decent amounts for the future “, – quoted DW.
This view is shared by the American economist Michael Pettis, who taught at Peking University for many years. If the concept of internal circulation can be implemented, then the growth of domestic consumption will negatively affect trade between the People’s Republic of China and foreign countries, he writes in the pages of the Financial Times newspaper.
The rapid growth of the Chinese economy is due to low wages and the absence of a social safety net, Pettis explains. To increase domestic consumption, high wages are needed, which, in turn, will lead to higher prices for Chinese products, which will reduce their competitiveness in the world market, summarizes the expert.
The Chinese authorities’ plan also states that the Celestial Empire should go from being a supplier of cheap goods to a high-tech manufacturer. By 2049, Beijing plans to become a leader in this area.
The new strategy is Beijing’s response to US leader Donald Trump’s policy aimed at separating the economies of China and the United States.
China may be forced to turn its back on three “hostile countries” – the United States, Canada and Australia – and focus on deepening cooperation with countries in Europe, Asia and Africa, notes the Global Times.
However, the European media is drawing attention to the deterioration of China-Europe relations, especially during the COVID-19 pandemic. According to journalists, the European Union is starting to turn its back on the People’s Republic of China.
This trend is also noted by Germany’s Federal Agency for Foreign Economic Relations Trade and Invest, which noted “an increasing trend to withdraw production from China.”
Experts attribute the cooling of relations between Europe and China, in particular, due to the trade war with the United States.
An era of disorder and pandemics. A new era begins
In mid-June, the European Union and China agreed to begin negotiations on signing a bilateral investment agreement by the end of 2020. But during the then video summit, it became clear that the parties disagreed on fundamental issues.
It is true that on September 14, at a press conference after the EU-China online summit, the head of the European Commission, Ursula von der Leyen, said that the parties agreed to initiate a high-level dialogue on digital technologies of Continuous form.
It is assumed that within the framework of these contacts, not only issues of market access will be discussed, but also the issue of regulation of innovative technologies, in particular, the work on the creation of artificial intelligence.
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