To avoid recession, China is investing in manufacturing and exporting up to half of its turn out goods. This may provoke trade wars with the US, Europe, and other countries, Bloomberg notes.
Due to problems in the economy, China has started investing more in manufacturing than in real estate, which previously accounted for about one-fifth of its economic growth, the agency observes. So far, this strategy has helped the country avoid a recession similar to the one in the US in 2008, when the real estate market collapsed, but at the same time there is a risk of imbalances that could lead to increased tensions in the PRC’s global trade with other countries.
The orientation towards production is reflected in the growing number of loans for industrial enterprises and the growth of exports of products varying from cars to washing machines. Beijing has been particularly successful in the production of electric vehicles, batteries, and solar panels. Bloomberg quotes an estimate that about 45% of China’s industrial products are exported because the population cannot purchase everything that is produced domestically.
The West has already started to react to these trends. The EU has initiated an investigation into Chinese electric cars. Ursula von der Leyen, president of the European Commission, warned that “overcapacity in China” in some sectors could undermine the European industrial base. A similar statement on the excesses was made by Janet Yellen, US Treasury Secretary.
Sources: bloomberg.com