The great victory of the former president of the United States is, for Xavier Mena, the construction of the story around the made in America industry. The professor highlights how the magnate has even managed to change the position of the Democrats, traditionally more protectionist, as well as that of the Republicans themselves, who have always stood up as defenders of free trade. The decentralization of many companies to China, due to low wage costs, to the detriment of the country’s industrial network, has been the perfect breeding ground for Trump’s speech.
Modaes Magazine number 52
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China deploys its artillery to revive its economy. On September 24, the president of the People’s Bank of China (the country’s central bank), Pan Gongsheng, announced a set of monetary stimuli, including the cut of the reference interest rate, the mortgage rate for existing homes, a reduction of the reserve ratio and a special package aimed at encouraging the stock market. The goal: protect your position in the world.
“China exports a lot to the world, but buys in the same quantities”
The challenges facing the Chinese economy are structural and cyclical. Population aging, on the one hand, which is affecting the entire world population, has had an even greater effect in China, governed for years by the one-child law. The irregular distribution within the geography, in addition, generates great inequalities between the coastal areas, industrialized and with a productive fabric, and the interior, which hinders the growth of the Gross Domestic Product (GDP) of the country. Besides, The Asian giant is immersed in current problems, such as the real estate crisis that it is dragging on and that has left a high percentage of the country’s population in debt..
“The real estate bubble that has burst in China is probably the largest in the history of humanity, and has dragged the country’s growth with it,” says Xavier Mena, professor in the Department of Economics, Accounting and Finance at Esade.
With such a positive trade balance, China has entrusted its growth to being the world’s great factory. Europe’s increasingly protectionist position and the US’s commitment to Made in America have created a situation of tension in the fragile balance of international trade. The big loser? China, clearly, although there is the possibility of other pieces falling behind. “China is an exporting country to the rest of the world that lives off of markets like Europe and the US and, if these are closed to it, its growth will be stopped in its tracks”defends Mena.
“The growth forecasts of the Chinese Government are a desideratum”
China, unlike the US, is not a country with access to raw materials such as oil, food or coltan. Its great competitive advantage, however, is being able to process industries from the rest of the world, explains Mena. “China may not have coltan, but what they have become experts in in recent decades is buying these materials and processing them”adds the economist and visiting professor at Jiao Tong University in Shanghai.
This system is what has allowed companies in the country, such as Huawei, to become leaders in the telephone sector. Until now, Mena says, Europe and the US placed orders for the finished products, China bought from Australia and Chile, for example, oil and copper, respectively, to process them. With the rise of protectionism, tariff wars and the fall in consumption of Chinese inhabitants, the Chinese machinery works increasingly slowly and this also ends up affecting the large sellers of products to the country. “China exports a lot to the world, but it buys in the same quantities, and if China’s economy falls, the rest of the world could follow”predicts the Esade professor.
“China is now seen by the United States as the great rival of its economy”
Until now, The Chinese economy had grown at a rate of between 10% and 12% annually. The Government’s forecasts for 2024, however, have reduced this figure to GDP growth of 5%. The Esade professor, however, questions the giant’s ability to recover from the handbrake that the West has placed on it.
China’s slowdown came with the rise of Donald Trump to power, who managed to impose on Americans the belief that, if China was growing, it was doing so based on its decline. “Traditionally, Democrats have been more protectionist, but Trump has extended the idea of protecting the industry”explains Mena, who defends that the United States “has always cared who was in second position, as long as it grew behind it.”
“The United States will maintain global leadership and China, regional leadership”
China has made its way into the international market little by little, first selling low-priced products and gradually entering other sectors such as technology, military or information. “China’s specialization in strategic sectors has ended up positioning it as the great rival – explains the expert – and now, at a time when there is a know how technological or a military component behind it, it will be more complicated for the giant if the US or Europe do not get in the way of its growth.”sentence.
The possibility of a fall in China would allow countries like Bangladesh or India to occupy the position of the world’s largest producer. For Mena, the situation in the world, much more polarized, and the specific conditions of these countries will not allow “a new China” to be born.. “The US is going to maintain undisputed world leadership for the coming decades while China is going to settle for securing its position as a regional leader in Asia,” adds the economist.
