Deflation, suspension of the publication of unemployment figures for young people – after a peak of 21.3% reached the previous month -, succession of disappointing economic indicators, tremors in the real estate sector with the collapse of the stock market of the property developer Country Garden… On the economic level, China has been accumulating setbacks for several weeks. As a result, the central bank lowered rates on Tuesday August 15 to stimulate activity. Should we be worried about the stalling of the engine of the global economy? Jean-Luc Buchalet, professor of economics, founding president of Pythagore Consult and author of Chinese Equation (Plume libre), explains to Le Point why Chinese growth is withering and will continue to do so.
The Point: Two years after the collapse of Evergrande, Country Garden, another real estate giant is in trouble. Should we be worried about the repercussions of this real estate crisis?
Jean-Luc Buchalet: China will undoubtedly experience a gradual disintegration but not a systemic crisis. In a capitalist system, at one point or another, the imbalances end up being regulated via a violent crisis and then a rapid restart. In China, this is not the case: the authorities are doing everything to prevent the real estate bubble, which has existed for a very long time, from bursting. You have to realize the magnitude of it. In some cities, real estate prices represent between 30 and 40 times household disposable income, compared to an average of 8 times in the rest of the world! The difference is mind-boggling. Real estate was the only place the Chinese could put their money, because the banking system disadvantaged individuals, and they invested not to rent but to speculate…
Country Garden is not the only cause for concern. The latest economic indicators are not good and China is in deflation while the rest of the world struggles with inflation…
Chinese growth is faltering and will continue to do so as the usual adjustment variable, real estate, can no longer be used to boost activity. A structural slowdown is underway and the power is doing everything to hide it: Beijing has suppressed the youth unemployment statistic, because it is annoying! The takeover of certain companies, such as Alibaba or Tencent, also played a role. In turn, this shortness of breath is driving up nationalism. Previously, Xi Jinping’s legitimacy was based on growth. Now it’s about the idea of ??invading Taiwan… That said, China is saved by its currency, which protects it because it is not convertible, unlike a country like Argentina.
No, she no longer has enough leeway. They can no longer redo the gigantic plans they made at certain times, such as during the subprime crisis. China had then experienced a strong recovery thanks to an orgy of credit. This year, the country will certainly not reach the 5% growth target of Beijing. And we must add to these challenges that of global warming, with increasing floods and droughts…
