cross-posted from: lemmy.sdf.org/post/42117154

[Op-ed by Dr. Tamás Matura, China-expert, associate professor at Corvinus University, Budapest, Hungary.]

Archived

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The reasons for the slowdown [of China’s economy] aren’t only cyclical, but also structural. One of the country’s most important pillars of growth, the real estate market, is in crisis. An estimated 60-90 million unsold homes have accumulated in the sector that previously accounted for nearly a third of GDP, and giant companies such as Evergrande have gone bankrupt. With 40-70% of household wealth tied up in real estate, the collapse in prices has shaken consumer confidence. People are saving rather than spending, which is also blocking the recovery of domestic demand. Investment – the former engine of growth – has been fuelled by credit for years and is becoming increasingly ineffective: the economy is saturated and firms are heavily indebted.

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Cracks in the system from within

The biggest challenge for the Chinese economy is its accelerating demographic decline. Chinese society is ageing, the work ethic of younger generations is deteriorating and structural unemployment is rising, especially among graduates. There is a growing dissatisfaction, young people’s confidence has been shaken and the “Chinese dream” has lost its appeal. […] This not only affects production but also threatens the entire welfare system. Although China has achieved spectacular results in certain fields of technology (e.g. e-vehicles, AI), the structure of its economy continues to be based on mass production and state investment.

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An asymmetrical relationship has developed between the EU and China: while Chinese companies […] are more and more present in Europe, the access European companies have to the Chinese market is diminishing. Hungary is particularly exposed: although significant Chinese investments have been made in Hungary such as the CATL and BYD factories, these are largely accompanied by state subsidies and political gestures, reinforcing economic and diplomatic dependence. If China slows down or the EU tightens its policies or a conflict escalates, there can be serious consequences for Hungary. Diversification is therefore essential, particularly towards South Korea, Japan, the US and Western Europe. Today business success depends on three factors: risk management, partner diversification and geopolitical awareness.