This year, China expects growth in the economy of between 4.5 and 4.9 percent, according to Bloomberg. In large parts of the world it would trigger jubilation, but not in a country like China. There, you are used to double-digit growth figures. The Middle Kingdom is struggling with deflation, which means that they make too many things, and people don’t buy enough of them. They are also not allowed to sell these things abroad, because the export figures are also going down. The result is that unemployment rises, and companies go bankrupt. – Serious The real estate giant Evergrande has applied for bankruptcy protection in the USA. Several other housing developers are struggling. – It is serious, says China expert Hans Jørgen Gåsemyr at the Norwegian Foreign Policy Institute (Nupi) to news. Most of the world otherwise struggles with inflation. This means that we produce too little of the values we demand. The result is that prices rise and purchasing power falls. CONCERNED: Joe Biden says he is concerned about China’s economy. At the same time, he is escalating the trade war. Photo: Jim Watson / AP The US president is also worried. He describes China’s economy as a “ticking bomb”. – China is in trouble, and that is not good. When bad people have problems, they do bad things, Joe Biden said last week. Biden added that he does not want to harm China and that he seeks a “rational” relationship with the country. LIMITS INVESTMENTS: Biden looks at a quantum computer developed by American IBM in Poughkeepsie, New York last October. Now it is no longer possible for American actors to invest in Chinese companies that work in the same way. Photo: Andrew Harnik / AP “A full-scale economic war” At the same time, Biden is limiting the ability of American companies to invest in China. There are companies operating in strategic fields such as artificial intelligence, data chips and quantum computing, which are now excluded. The decision is the latest link in what the Financial Times describes as an invisible war. SOUTH CHINA SEA: A Chinese Coast Guard ship fires a water cannon at a Philippine ship. Another arena for confrontation between the US and China is in the South China Sea. Photo: CHINA COAST GUARD / Reuters «Imagine that a superpower declared war on another country, and no one noticed. This month, Joe Biden launched a full-scale economic war against China. The US is determined to stop China’s rise. And for the most part, the Americans did not react.” US commentator Edward Luce wrote that in October last year. The reason was that Biden had just made it almost impossible for China to obtain advanced computer chips. Since then, the US has gradually tightened even more. Hans Jørgen Gåsemyr believes it is too early to say how hard this trade war will hit China, but that it will have consequences anyway. – The trade war will have an impact both politically and economically. There is little doubt about that. But I don’t want to link the current problems in China to the trade war. They are the result of a major restructuring that took place both before and after covid, says the Nupi researcher. CLOSE UP: A series of tall and uniform buildings built by the Chinese company Country Garden stand in the fog in the big city of Zhenjiang in Jiangsu Province in China. Photo: STR / AFP Housing crash China’s economic crisis is felt particularly well by the large housing developers. Real estate giant Evergrande filed for bankruptcy protection in the United States on Friday. In July, Evergrande reported a net loss of more than NOK 1,200 billion for 2021 and 2022. Another property giant that is struggling is Country Garden. The stock fell 16 percent on the Hong Kong stock exchange on Monday. The reason was that the company did not pay debts on time and announced a loss of billions. After many years of rapid growth in both the economy and the population, and urbanization, there are now far fewer people buying homes in China. ABANDONED: An abandoned housing complex in Shenyang in Northeast China is emblematic of many failed housing projects in the country over the past decade. Photo: JADE GAO / AFP Housing development has long been a mainstay of the Chinese economy, and many fear major ripple effects if the developers collapse. – If China’s economy does not get back on track, it will be felt in the world economy, says Gåsemyr. At the same time, the authorities’ tightening of housing developers can have a positive effect in the long term. – By tightening up, you get less debt and less risk. This makes the economy more sustainable, explains the Nupi researcher. – Must not be too alarming Although there are several worrying trends, Hans Jørgen Gåsemyr also sees positive features. – We must not be too alarmist, he says. RESEARCHER: Hans Jørgen Gåsemyr is a senior researcher at the Norwegian Foreign Policy Institute (Nupi), and closely follows Chinese politics. Photo: Christopher Olssøn / Christopher Olssøn He believes there are three reasons why the situation is more or less under control: – The first reason is that the Chinese economy is still growing, and according to forecasts, that growth will continue, he says. – In addition, many of the problems in, for example, the housing sector are linked to planned and desired austerity measures. The authorities are trying to clear up a number of uncertainties and irregular conditions. They sit on a large toolbox, emphasizes the Nupi researcher. – The debt burden in China is large, but owned by national Chinese players. This means that China has many more steps they can take to improve the situation.
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