Two worlds. At the end of July, the European Central Bank (ECB) announced a new rate hike to curb inflation. In China, it is quite the opposite. Earlier this week, Beijing announced another rate cut to stimulate a struggling economy.
Deflation, falling exports, youth unemployment at its highest… For several weeks, negative signals have been multiplying. Above all, the difficulties of Chinese property developers – Country Garden and Evergrande – have caused panic in the markets in recent days. But what will be the real impact of these tremors on the European economy?
While everyone’s eyes are on real estate developers, the risk of Lehman Brothers-style global financial contagion is rather limited, with a still relatively closed Chinese market. “And even if some investors are affected, such as Blackrock, the overall exposure is rather low,” explains Patrick Artus, economic adviser at Natixis.
The difficulties of these giants are above all one more indication of the worrying state of health of China, victim both of a structural landing of its economy and of the slow deflation of the real estate bubble. A fact known for a long time… But which had been somewhat forgotten in the euphoria of the post-Covid recovery. “At the start of the year, growth forecasts were revised upwards: they were probably a little too optimistic,” said Victor Lequillerier, economist at BSI Economics.
A slowdown that will inevitably have an impact in Europe. When the engine of global growth, which captures 4% of EU exports, stops, we cough. Among the most exposed countries in the EU: Germany, France and Italy, which sell capital goods, cars or pharmaceuticals to Beijing.
Another indirect effect, “China’s recovery plan focuses on the automotive sector, and could increase, which risks widening the gap with Europe even more on electric vehicles”, worries Victor Lequillerier .
The only good news in this gloom: the price of oil, which has already started to falter with the Chinese difficulties, could stop its rise, or even plummet. According to the International Energy Agency, China was expected to account for 70% of the increase in barrel demand this year. A forecast that could prove to be far too optimistic, to the delight of motorists.
