Handelsblatt: China’s economic model in crisis

Handelsblatt Editor-in-Chief Sebastian Mates talks about a crisis in China’s economic model in his note today.

Europe is circling around itself, he says. And this is understandable, given the great risks: the war in Ukraine, dependence on Russian energy supplies and record inflation.

But one particular item caught Mathes’ attention last week and shows that one has to look much more closely at China: 58% of European companies said in a survey that they have lowered their sales expectations in China for 2022, in some cases significantly. China is experiencing “economic turmoil of epic proportions,” says Jörg Wuttke, president of the European Chamber of Commerce in China.

-Chinese economic growth is collapsing, some economists are already seeing the country in recession,
-consumption decreases,
-car sales and industrial production are declining.
and with them exports.

At the same time, tech companies that were just celebrating are now laying off hundreds of thousands of employees, says Handelsblatt editor-in-chief. “Something is changing radically here,” Handelsblatt’s correspondent in China Dana Heide told Mates when he called her in Beijing. Within a few weeks, the climate had changed completely and many people were surprised only by the financial data.

Many were at least as surprised when they looked at Shanghai. For weeks, the metropolis, once liberal by Chinese standards, was locked up. People are disappearing for weeks in hospitals, children are being separated from their parents and hundreds of cargo ships are stranded off the coast, unable to disembark.

Western expatriates just want to leave, says Mates. The problem is that if they find a seat on one of the few planes, get a special travel permit and are allowed to leave their homes for the trip, there is still no guide to take them to the airport, because they are not allowed to leave their homes either. .

At the same time, the situation in Beijing is deteriorating, says a Handeslblatt partner. Another apartment building in her neighborhood has just closed completely. Some friends and colleagues are not allowed to leave their homes for days.

While many of its Western contacts have since left the country, Hyde continued to travel to China until a few weeks ago. He now also lives in Beijing for the time being. From there, she will continue to monitor the situation with her colleague Sabine Gusbeth, as various important data on the state of the Chinese economy will be announced in the coming days. Then we will have a first indication of how deep the crisis of the Chinese economic model really is.

One thing is clear: China is undergoing a fundamental change today. Until now, the economy has been at the forefront, the growing prosperity of much of the population. Now the focus is more and more on national security. This is bad news for Europe and European companies.