China continues to disappoint amid trade conflict with the United States. Growth in the second quarter was 6.2%, down 0.2 points from the first quarter, Beijing said Monday (July 15th). This is the worst performance of the Chinese economy for 27 years.
This slowdown is "to put into perspective because in 1992, China's GDP was lower than that of Spain [$ 426 billion against $ 629 billion, Ed], while it is currently ten times higher, so the performance remains But it is true that the trend is for the deceleration of growth, "said Jean-François Dufour, president of the consulting firm DCA-China Analysis, contacted by France 24.
Impossible to do as in 2008
Above all, economic activity stubbornly refuses to restart. For more than a year, the economic results of the world's second largest economy confirm, quarter after quarter, that Beijing can not get the machine back on track.
Most industrialized countries would be happy to be satisfied with 6.2% growth, "but in China, social stability depends on good economic performance," says Jean-François Dufour.
Beijing therefore seeks by all means to boost its GDP ... without success for now. "China's big problem is that the authorities can not reiterate the big recovery plan put in place after the 2008 crisis," notes the French expert. Beijing is still solving the problems created by the injection into the economy, at the time, of 586 billion dollars. Foolish sums that had enabled the country to avoid the backlash of the international financial shock, but led to a high level of indebtedness of companies (because of the credits granted) and industrial overcapacity. "Under these conditions, it would be counter-productive for China to try a new stimulus by the investment which would have the effect of canceling the restructuring efforts", summarizes Jean-François Dufour.
Deprived of this leverage, the regime relied mainly on three drivers: smaller investments in Chinese infrastructure, domestic consumption, and the dividends of the new "Silk Roads" (the big investment program outside Chinese borders).
Impossible to do otherwise than in 2008
For now, it's a disappointment down the line. The investment effort is not enough to counter the combined negative effects of a sluggish global economy and trade war with the United States, while the benefits of the "silk roads" (creation outlets for Chinese companies) are still waiting. As for domestic consumption - on which Beijing puts most of its hopes - it is caught in a vicious circle: "It is supposed to take over the public investments, but the lack of financial support from the state creates an anxiety among consumers who prefer to opt for precautionary savings ", analyzes Jean-François Dufour.
The central government finds itself in an uncomfortable position: it can continue to wait for the consumption and the "silk roads" to fulfill their role of engine of growth, or to return to the old reflexes of the Chinese Communist Party and open the tap again. for public investment. For the director of DCA-China Analysis, the main goal of power being to use the economy for social pacification, Beijing should opt for the second solution, and postpone structural reforms to later. "This time, the Chinese authorities should not announce a big plan of action in one go, but rather do it by successive keys," he said.
President Xi Jinping would follow the example of Chinese leaders for 30 years: an ambition to clean up the Chinese economic model, thwarted by the obligation to maintain strong growth that pushes the subject of reforms to the next generation of leaders . Growth, which has been slowing for more than a year, is a sign of "China's difficulty in breaking out of its traditional development model," Jean-François Dufour summarizes. Beijing says each time that so far everything is fine. But the important thing is not the fall, as some would say, it's the landing.