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China Market Insider Credit glut at the expense of the global economy?
China is flooding the industry with money and wants to create its own high-tech giants. The focus is on automation and digitization.
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Never before has a country’s manufacturing industry been so inundated with money as the Chinese one this year. China’s industry ministry MIIT announced grants and loans totaling 710 billion yuan (around 90 billion euros) in September, all for advanced manufacturing technologies. The money, partly direct government expenditure, partly cheap loans from state banks with the summary label “Special loans for the manufacturing industry”, is earmarked for 105 key projects. And it’s just the beginning, reports the South China Morning Post.
The reasons for the money glut are highly political, but the consequences will distort competition for years to come and have concrete economic repercussions for large and small companies that are active in the Chinese manufacturing industry. China’s head of state and party has ordered that China’s economic development in the area of state-important “key technologies will become self-sufficient and controllable”. A large part of these projects is based in the modern manufacturing industry. It is China’s answer to US President Donald Trump’s trade war and the global setbacks for China’s high-tech companies such as Huawei and Tiktok. A Chinese manufacturer of electrical components, “Zhejiang Junlang Electric Co., Ltd.” is the first company that recently received a loan of ten million yuan (about 1.3 million euros). Long-term, with low interest rates, and jointly approved by China’s Ministry of Industry and China’s Development Bank, this was the very first of a veritable spate of government subsidy loans to the manufacturing industry that began in September.
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