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China, where the slow descent to "economic normality"

In China, the growth of 2018, which was made public on Monday, has never been lower since the 1990s. An economic slowdown likely to continue, because Beijing no longer has the same means of action as in the past.

China had not experienced such low growth for nearly 30 years. The Chinese economy grew by only 6.6 percent in 2018, Beijing said on Monday (January 21), confirming the fear of a slowdown in the Asian superpower.

In the pillars of the world, the Chinese economist Xiang Songzuo even compares the current situation with the economic crisis of 1929. "If you look at the performance of the stock market, it's comparable." In the ten years since 1929, Wall Street has been two-thirds. In the past decade, Chinese stocks have also fallen by an average of 70%, "he says.

Risk of uncontrolled blocking

But we need to know why we have to stay, says Jean-François Dufour, specialist of the Chinese economy and director of the consultancy DCA China Analysis, contacted by France 24. "The panic around the figures of Chinese growth is irrational", says – t it. An annual growth rate of 6.6% remains high compared to the standards of Western economists. "The wealth added to the Chinese economy in 2018 is equal to the total GDP of the Netherlands", said the expert.

What worries him more is the trend in the longer term. "The risk would be an uncontrolled economic downturn with major consequences," says Jean-François Dufour. A disaster scenario not only for the Chinese, but also for the Japanese auto parts manufacturers, the French luxury goods manufacturers or Apple and its iPhone.

Because the Chinese slowdown is threatening to end in a deep crisis. Not because of the tensions between Chinese-American trade that "are only an aggravating factor", according to Jean-François Dufour. The problem is deeper: the Chinese economy is drowning in debt. Corporate debt has indeed reached 160% of GDP, while in the United States it is only 75%. Chinese president Xi Jinping has been trying for three years to reduce this by reducing investments in infrastructure (ie business loans), which has caused industrial activity to slow down. Added to this was the trade dispute that hampered the engine of export.

Careful stimulation plan

How to reverse the trend? In 2008, the regime put $ 580 billion on the table to prevent the global financial crisis from reaching China. This is no longer possible in 2018: "The maneuvering areas of Beijing are much smaller," says the Wall Street Journal. The current situation is in fact partly a consequence of the efforts made during the last financial crisis. Money has flowed in the form of loans to companies and consumers, as a result of which the level of debt has increased rapidly. Repetition of the story can make an already tense situation explosive.

But Beijing lacks alternatives. At the beginning of January, the authorities decided to introduce a mini-investment plan that included the re-start of railway projects or the simplification of the administrative formalities for granting credit and pushing the Chinese to consume more. Jean-François Dufour expects the regime to remain "in this direction, but pay attention to the fact that the debt levels remain under control".

A cautious approach that "certainly will not be enough to reverse the trend," says the French expert. At this stage, and because of lack of means to take action, the Chinese authorities are satisfied to manage the economic slowdown. They are all the less likely to do more than "Beijing has an interest in keeping a few patterns aside in case the negotiations with Washington fail on 30 March. [fin de la trêve commerciale décidée en décembre, NDLR]", Ensures the American channel CNN, a Chinese analyst who wants to remain anonymous.

China is thus preparing a slow descent towards economic normality with growth rates comparable to those of the industrialized countries. "An evolution that is expected by the government for a long time," says Jean-François Dufour. But is the rest of the world ready? For more than a decade, China has enabled companies around the world to increase their revenues with a share of astronomical growth. If yesterday's Asian Eldorado is no longer the engine of global growth, they will have to adjust. But the task will be far from simple, just like Apple's recent financial problems that caused the decline in sales of the iPhone due to the slowdown in the Chinese economy.

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