Agency Report –
A seething crisis on the property market, too little consumption and now Donald Trump is returning to the White House. The Beijing statistics office has announced that the official growth target of five per cent was achieved with a precision landing last year and that the mood brightened towards the end of the year. However, observers fear that the second largest economy will remain in difficult waters for the time being. Many German companies must also be prepared for their lean period in the Far East to continue.
Modernisation to be driven forward
There are headwinds from several sides. Many Chinese people’s wealth is largely invested in their homes. However, property prices have fallen sharply recently because the financial problems of major developers have triggered a crisis of confidence. As a result, people are also spending less on other purchases.
Beijing has done a lot to stimulate the economy. This is why growth from October to December was higher than in previous quarters at 5.4 per cent. However, the actual priority of the economic planners remains a different one: The country is to continue its modernisation.
Targeted support is being given to future-oriented industries so that new global market leaders can emerge quickly. China wants to further advance its technological independence in order to better protect itself from further restrictions and punitive measures by the USA.
No significant improvement expected
‘The economic situation in China is not expected to improve significantly in 2025 either,’ says economist Max Zenglein from the Merics China Institute in Berlin. Especially as Donald Trump and his team could further increase the pressure on Beijing compared to the Biden administration.
The US president-elect had already announced in December that he intended to impose new tariffs of ten per cent on Chinese goods on his first day in office. This would further burden China’s foreign trade and thus an important pillar of growth.
Especially as many observers expect that a spiral of tariffs could be set in motion if Trump carries out his threats. China would respond to any measures taken by the US with countermeasures. Such a trade war already occurred during Trump’s first term in office.
German companies fear the consequences
As was the case back then, German companies are still very nervous now. ‘German companies in China are facing the new year with subdued expectations,’ says Oliver Oehms, Managing Director of the German Chamber of Commerce in North China.
A third expect the economic situation to deteriorate compared to the previous year. The main headaches are sluggish domestic demand, tough competition from increasingly strong local companies and the resulting price pressure on the market.
Risks are difficult to calculate
‘This constellation is compounded by risks that are difficult to calculate, above all the trade conflict between China and the USA and the feared increase in trade barriers worldwide,’ says Oehms.
Despite the difficult situation, many German companies would continue to invest in China and expand existing local capacities, for example in the area of research and development. After all, they do not want to be left behind in this relevant market. The companies are hoping that Beijing will step up and take more measures to promote consumption.
Will Beijing follow up with further aid?
This does not appear to be completely out of the question. For China as a large economy, domestic consumption is the basis for maintaining growth, says Yang Ping, Director of Investment Research at the Institute of Macroeconomics of the Beijing Reform and Development Commission.
According to the government’s economic expert, they are prepared for Trump. ‘Even if he implements a series of unfavourable or bad changes, we have experience from the past and our base of control and regulation,’ she warns Washington. Because China sells much more to the USA than vice versa, it initially has the short end of the stick in a tariff dispute.
However, otherHowever, other retaliatory measures also seem possible. For example, the Chinese dominate the supply of rare earths, metals that are also of great importance to many US tech companies. Beijing could also consider making life more difficult for US companies on the Chinese market retaliatory measures also seem possible. For example, the Chinese dominate the supply of rare earths, metals that are also of great importance to many US tech companies. Beijing could also consider making life more difficult for US companies on the Chinese market.
