China, exports and imports are sinking: that’s why

Sinologist Sisci: “It is possible that the trend will continue throughout the year”

China’s exports and imports, the second world economy, sink in July. According to data provided by the Asian giant and reported by the Dpa agency, they are respectively down by 14.5% and 12.4% on an annual basis. More than expected. “It is possible that the trend will continue throughout the year for two joint reasons, the cooling of the global economy and then the gradual impact of derisking”, sinologist Francesco Sisci explained to Adnkronos. But there is also a third element and it is “the internal difficulties” with domestic demand which – the expert points out – “is not recovering” both because “the real estate driver has collapsed, which for 25 years has driven all the growth and which still today probably occupies 60% of total bank loans”, and because there is “probably a generalized distrust of investors and consumers after three years of closure due to Covid” in a country that had chosen the ‘Zero Covid’ strategy ‘ with endless lockdowns and draconian measures to contain infections that have had a major impact on the economy. And, continues the expert, there is also “the impact of the campaign against corruption which eliminated an old way of doing business without creating a new one”.

“We will see in the coming months if the new measures introduced can have an impact, but – he warns – these measures actually focus on supply and not on demand. They make large capitals available, but in reality, just look at private savings and l ‘increase in long-term deposits, the Chinese economy does not lack capital but the desire to spend and invest”. Not to mention unemployment among young people.

Sisci sees in the data on exports (exports have historically been a fundamental engine of growth for China) and imports “a decline compared to 2022, which was the record year for Chinese exports”, but “not a vertical collapse” , speaks of an “important signal” and underlines how what will happen “will also depend on how the rest of the world reacts, whether in the face of this signal it will return to China or flee” from the Asian giant.

In this context, according to the expert, the Chinese “should launch a series of internal reforms that protect private property in a more organic way”, a “total revolution” with “protections” that would have “political impact”. Because “a strong protection of private property means a limitation of the Party’s power” and “there is a short circuit here”.

Sisci speaks of “Chinese investors and consumers who are uncertain of the future also because what the Chinese growth model for 40 years was linked to an almost symbiotic relationship with the USA is fading” in a period in which there is instead “a tension growing”. We should also, he points out, “reach full convertibility of the Renminbi soon” and “implement political reforms that make the Chinese decision-making process more transparent for Chinese and foreign investors”.

It is important to underline, he continues, that “with the collapse of exports but also of imports, the surplus will probably remain the same” after “last year it was about one thousand billion dollars, in reality all made with the countries of the enlarged G7” . And, he says, “there is no alternative to this” even if the data provided today by China speak of ‘robust’ exports to Russia which – concludes Sisci – “are not such as to compensate in the least for trade with America or the ‘Europe’ despite the friendship between Moscow and Beijing, which has never explicitly condemned the Russian invasion of Ukraine.