China’s President Xi Jinping during a signing ceremony with Maldivian President Abdulla Yameen at the Great Hall of the People in Beijing, China December 7, 2017. REUTERS/Fred Dufour/Pool
China wants to change its growth model and give the manufacturing sector a larger role, said Leland Miller, CEO of China Beige Book, “CNBC”.
This will boost exports, which could trigger unrest in global economies and trade wars.
China is already proving itself in the production of electric vehicles, solar cells and batteries.
As China seeks to transition to a healthier growth model, its strategy could trigger a neck-and-neck race with other global economies, said Leland Miller, CEO of China Beige Book, „CNBC“.
Beijing is focusing more on the manufacturing sector and therefore needs to sell more products on international markets.
“You need to get the export engine going,” Miller said Wednesday. “This will cause a lot of problems worldwide, including politically. This is why I believe we will enter a trade war next year. Because the Chinese economic growth model is not sustainable given the political sensitivities in the rest of the world.”
Miller said the government is pouring more credit into manufacturing in hopes of reducing China’s reliance on the real estate sector. With the real estate sector accounting for about a quarter of China’s GDP, a large wave of defaults in the sector has painted a bleak picture for the country’s economy.
There are also other factors that created headwinds after the pandemic, such as low domestic spending, the exodus of foreign investors and persistent deflation and unemployment trends.
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China wants to “avoid a loss of trust”
Foreign experts have long called for Beijing to take decisive stimulus measures to address these circumstances. However, Miller argues that this completely misses what China is trying to achieve:
“They’re worried about reckless credit expansion, they’re worried about the real estate sector,” he said. “They just want to prepare and focus on national security priorities, building a chip ecosystem, solidifying the core of the economy and focusing on modern manufacturing.”
To this end, China is no longer relying on the rapid growth of previous decades; The recently announced growth target of five percent for this year is even irrelevant: “They are only concerned about ensuring that the economy is sufficiently supported to avoid a loss of confidence so that the bottom is not reached,” he explained.
Although some believe that China’s manufacturing has already peaked, the country continues to prove its strength in areas such as electric vehicle manufacturing, solar panels and batteries.
This is already leading to international conflicts. In 2023, Chinese electric car maker BYD replaced Tesla as the world‘s top-selling company and began cutting prices internationally to attract buyers.
A flood of Chinese solar panels to Europe has now sparked warnings that one of the region’s largest manufacturing plants could close.
This article was translated from English by Jonas Metzner. You can read the original article here read.
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