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AB 2000 studies

Alain Boublil Blog

 

China has rebounded

The publication of the last purchasing managers indexes in China shows that the exit from lockdown and the end of the Lunar New Year holidays are characterized by a much stronger rebound of the Chinese economy that it was expected by the developed countries economists and as a rule by the politician world. Chinese authorities had been strongly criticized about the imposed rigor to fight against the pandemic, with notably, the lockdown and the travels ban. Industrial components supply chains had been disrupted generating scarcities and prices increases. The move without any transition from the “Zero-covid” to the normal activity had been interpreted as a political defeat of the government and as giving way in face of the discontent which was affecting the whole country. It had also been the object of a lot of skepticism about its economic consequences.

At the end, and at least during the beginning of the year, these forecasts have been invalidated. The growth objectives of the Chinese government for 2023, between 5 and 6% would be reached. Anyway, Moody’s, the rating agency, has increased its forecast to 5% against 4% until now; yet, we could say that these rates are still far from recovering the levels of the past decades when it reached 8% and even more. But these comparisons between different periods haven’t a lot of sense because, meanwhile, the size of the Chinese economy hugely increased and in an absolute value a today 5% GDP increase corresponds to a wealth creation a lot superior to that the one generated by a 8% growth ten years ago.

China is the only one, to the difference of the G7 members economies, to have not known a recession during the sanitary crisis. And the 2.2% ,7.5% and 3% growths in 2020, 2021 and 2022 put the country a lot higher than the average because in all the other economies the production drop in 2020 largely overpassed 5%. The country is also less affected by the inflationist wave because prices are only increasing year on year by between 2 and 3%. At last, foreign trade is still accumulating huge surplus. They reached 877 billion dollars in 2022 after 676 billion in 2021 thanks to exports growth which is still going on (+7%) when imports have stagnated last year (+1.1%).

Real estate which is affected for two years by a heavy crisis seems to come back in the good direction because has been seen in February a very strong increase of the transactions. The sector remains very fragile but the State, if it was needed, could intervene if it was necessary to proceed to the rescue of real estate groups or of the financial institutions which have given them credits because the country high indebtedness is covered by national saving. It will not have to recourse to foreign financings thanks to the accumulation of its balance of payments surplus.

The car industry has gone through that difficult period better than in the developed countries, especially in Europe. There were more than 27 million registrations in 2022, i.e. near three times more than in Europe or in the U.S. and 3 million car have been exported. The observed components supply chains difficulties have much less hurt the Chinese carmakers than their competitors. Among these 27 million, 7 million, near 26%, are equipped with the new motorizations, electric or hybrid.

In that kind of industrial activity, size is a decisive factor of competitiveness. We measure so the handicap, in this market, the European industry which is ten times smaller is going to be confronted with if, from 2035, will be forbidden the sale of vehicles with a thermal engine. We see the strategic advantage offered to Chinese car manufacturers by the huge volumes of raw materials they have at their disposal to produce the batteries. Even if rare earths or special metals resources exist in other places in the world, it might take a lot of time to put into operation these fields, if also we suppose that environment defenders on the territories don’t launch endless procedures to block the projects.

China follows at its rhythm its policy to decarbonize its power production. Nuclear has produced 392 TWh in 2022 and two new nuclear power plants would start to come into operation in 2023, allowing to reducing by near 300 million tons its CO2 emissions, a level near France yearly total emissions.

World has changed and also the globalization rules but China will still be there. It is so an illusion to think that the relations with this country will not have the same importance. To the opposite, new forms of partnerships must be imagined and proposed. But to have a chance to succeed, and in order to the European Union and especially France relationship with Beijing take a new start which will be profitable for both, it is necessary to have taken into conscience of the reality of the Chinese society, based on its history and on the civilization the country thinks it is the heir. In this domain, Germany has taken the lead and keeps itself far from putting the Chinese leaders into accusation.

Public critics of the regime, mostly for internal political reasons, are so incompatible with the establishment of win-win relations. Official visits must be preserved from that and can even be the opportunity of the recognitions of past faults, even if they bring back far in history. France cannot permanently recall the damages of the colonization and forget that its troupes have invaded China and have participated with the English army to the destruction of the Summer Palace, located near Beijing. It is a little as if, during the Occupation, Germans had demolished the Versailles Castle.

Time has also come to hail the transformations that the reforms instituted by Deng Xiao Ping and why not, to pay a tribute to him in going to Shenzhen, the emblematic capital of the new Chinese economy, where there is a statue showing him “walking” in the middle of a public park. A few kilometers from there, is the Taishan nuclear power plant where EDF and its Chinese partner have built two EPR reactors which have been connected to the network last year, so much sooner than Flamanville reactor and which constitute a good example of a successful cooperation. That manifestation of interest would come at the right time because France has at last decided to relaunch the construction of nuclear power plants, abandoning the absurd idea to reduce to 50% the share of nuclear in the power mix.

The Chinese economy is so rebounding but in a different environment, affected by geopolitical tensions and economic rivalries and by the technological transformations needed to cope with the climate warming. Nothing allows to thinking that this new environment will be unfavorable because the country has at its disposal the natural resources, a large internal market and human capacities to cope with all these challenges, even if it has to manage the demographic change it is confronted with.

A page has just been turned in China and more generally in Southern Eastern Asia in the countries whose economy is tightly connected with it. That will contribute to support the world growth. The establishment of new relations with all these countries is going to become a necessary condition not to lag behind the coming world rebound. It is the France duty to successfully profit of it because Chinese consumers appreciate French products.                 

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