What is really happening in China today? The summer was full of decidedly negative economic, financial and social news for Beijing, but understanding what the future of the world's factory and the Asian giant will be is by no means simple. The boom in the real estate sector, which alone is worth 30% of GDP and which for a quarter of a century has been the driving force behind China's spectacular growth, is there for all to see, but it may not necessarily be the end of its economic miracle . What is certain, however, is that today's China is paying for the delays in economic and welfare reforms and for the indeterminacy of the Xi Jinping era which marks more than a discontinuity with respect to the Deng Xiaoping era. Giorgio Trentin thinks so, sinologist, professor of Chinese language and contemporary history at the University of Macerata, free director of the Confucius Institute, son of the deceased trade union leader of the CGIL, Bruno Trentin, and author of various texts on the Asian giant. "The China that arrives" and "The hidden Church, a journey in Catholic China" and "Chengyu one hundred aphorisms of the Chinese tradition", are the best known. When asked what prompted him to study China, Trentin replies as follows: "I had the taste and the curiosity to look up to the other side of the world". And since the years of his university studies at the Sapienza University of Rome he has never stopped cultivating his passion for China and deepening his knowledge by rejecting ideological schemes and stereotyped interpretations: With this interview with FIRSTonline Giorgio Trentin helps us understand the China today. Let's hear it.
In the summer of 2023, China collected a series of disturbing economic, financial, social and political news: from the default of the giant Evergrande to the insolvencies of Country Garden and Zhengrong to the boom in the real estate sector, from the slowdown in economic growth to the drop in consumption, of imports and exports and deflation, from record youth unemployment and the suspension of labor statistics to the devaluation of the yuan against the dollar. What is really happening in China? Is this the end of the economic miracle and the crisis of model XI?
«The answer, says an old popular Chinese adage, has many faces. The collection of negative data from the Chinese economy between the end of 2022 and this first half of 2023 creates a not entirely reassuring picture more than on the overall health of the economy on the situation of the economic policies implemented by Beijing. But the picture is complex, connected to many factors - internal and external - and must be analyzed with caution. Looking at the Evergrande case, for example, we have all noticed the rush of the Western mass media - the United States in the lead - in shouting loudly that the Chinese model had completely failed, that Beijing consensus which had guaranteed the growth of the Chinese presence up to now in the international industrial and financial markets. Few have paused to highlight the fact that Evergrande's protected bankruptcy filing in New York pertains only to its operations on American soil and with American creditors, i.e. only its overseas operations. The size of Evergrande's overall debt at home is certainly high, but not dramatic and, with the new reforms of the debt restructuring systems that Beijing is putting in the pipeline and which would bring new financial supporters to the field for the group, Evergrande's future it might be less leaden than you think. Furthermore, the hypothesis of a domino effect on a global scale, as it was for Lehman Brothers in 2008, I would say that at least for now it is completely excluded"
Why?
“China enjoys in this case a currency that is in a state of weakness, but not fully convertible and therefore sheltered from storms or the risk of large-scale capital outflows. With $3.000 trillion in reserves, Beijing is still perfectly capable of defending itself against speculative attacks on its financial system. Of course, in these circumstances the timeliness and size of a defensive intervention are essential, and this brings us back to an observation of the picture from a more purely political perspective. Evergrande may not collapse in China, but its crisis certainly speaks to us of the end of the growth of a sector, the real estate sector, which together with that of major works has been the driving force for Chinese industrial growth for a quarter of a century - steel in the lead - and to the creation of large financial investment conglomerates at home, but especially abroad. The real estate sector has reached its plateau and today almost twice as much is being built as it is being sold. China must look - and is looking for - new horizons towards which to direct a new impetus of economic growth (partly contained in the Made in China 2025 planning document), but the positive effects of these new plans will probably begin to be appreciable over the next at least a five-year period and, therefore, the negative effects of the delay in the reforms of economic policies and those of welfare - another essential element for social stability and for the stability of internal consumption - could be felt sooner. Are we facing the end of the Chinese economic miracle? I do not believe. A medium-term setback yes, but considering the route taken towards high technologies and also the vast consolidation of an international front of South-South economic cooperation of which the expansion of the BRICS group is only the most striking aspect, the idea of a Chinese economic recovery with GDP growth of even around 8-9% by the end of the next decade is not entirely farfetched».
Observers of Chinese affairs seem to be divided between those who think that the origins of the crisis are political, linked to Xi's authoritarianism and statism and linked to international tensions, and those who believe instead that economic reasons lie at the basis of the current Chinese difficulties, starting from the crisis in the real estate sector which has perhaps had a growth drugged by an excess of investments and easy loans from shadow banking. What is his opinion?
«Also in this case the answer is multifaceted, just as all the hypotheses in the field contain a part of the answer. In the 90s, in the most mature phase of the "reform and opening up" policy inaugurated by Deng Xiaoping with the third plenum of the 1978th Congress in XNUMX, a social pact was generated between the Party and the country which the de facto freedom for the Chinese to be able to write their own economic destiny, in exchange for political consensus for the leading role of the CCP. On this basis, the new Chinese entrepreneurial class was formed, which learned to operate successfully in delicate contexts, in which the boundary between public and "non-public" economy (let's avoid talking about "private" economy) was never osmotic and fleeting, benefiting from very generous funding from a banking system that was just as learning to take its first steps in capital investments and which, above all, responded to Beijing and not to the markets. The Party, in turn, followed a model - inaugurated by Deng with the end of Maoism - of leadership changes every ten years, an element that guaranteed priority to the governance of the country, not to the leader. The Party comes before the man in charge. Then came Xi. Ten years of a policy built around the fight against corruption, the restoration of a central role of the state in all sectors of the economy and the use of the economy as a tool of public diplomacy in international relations, have ended up generating unspeakable fruits. positive in the country's economy, causing a general depression of a large part of non-public entrepreneurship increasingly fearful of becoming the target of the fight against corruption, a use of the tax club as a weapon of coercion and domestication towards those entrepreneurs who are too visible and too close to the profile of "oligarch" (Jack Ma), the closing of the bank taps for those financial nebulae that are too complex and articulated and, therefore, difficult to control (Evergrande) and, finally, the exacerbation of international economic tensions in the context of which the Western public opinion has ended up superimposing the image of industrial aggressiveness on the part of an economic actor on that of the Chinese state (Huawei)».
President Xi recently declared that China is facing "changes never seen in a century" but, in the face of the anger of the young jobless graduates and graduates, he goes so far as to crudely say: "Learn to eat bitterness". They don't seem like comforting signs, but what exactly does Xi mean and what does he plan to do after winning the last party congress?
«It is extraordinary to see how much the language of a people is an element of identity which, if poorly rendered in the language of the other, can lead to great misunderstandings and misinterpretations. The Chinese rarely use grandiose expressions to describe the time in which they live and often the expressions they use are quite open to perspectives that are not necessarily only positive. Xi Jinping is also no exception. With the expression "changes never seen in a century" Xi means that China is facing a period of unprecedented economic and social challenges and changes from which it cannot escape. I believe that this is not necessarily a statement of grandeur and that it could also concern all of our Western realities. It is noted that - on a global level - the post-Yalta order is increasingly failing, that the very Westphalian concept of the nation-state is now superseded by the emergence of new aggregators of social interests and non-state national and transnational actors. A new model of international order is not on the horizon and multipolarity seems to many - not to the United States - to be an essential starting point for governing the changes taking place in the present. In a context like this, full of challenges but also of potential, the Chinese expression "chiku" (literally "eating bitter") used by Xi means "holding on", knowing how to "endure adversity", in a towards the construction of a better future".
Don't you think that the disappointment of Chinese high school graduates and graduates who often don't find work could cause the breaking of the social pact between the new generations and the regime?
Of course, Xi's is political rhetoric that clashes not a little with the data on the new generations that the government until recently was displaying with great pride and which is now being silenced under the pretext of a redefinition of the calculation parameters. According to the latest surveys relating to urban employment (a figure therefore partially relative), against an overall unemployment rate which remains stable overall at around 5,3%, the unemployment of the 16-24 age group last June it exceeded the threshold of the comfort zone, reaching 21,3%. The figure, we repeat, is partial because it is on a monthly basis and relates only to urban areas, however it is at the same time an alarm bell about a social stress that is affecting many families of the Chinese middle class, whose savings are time bound to the expenses relating to the two items in the budget: the purchase of real estate and the education of children. Domestic consumption, limited to a growth of only 2,5%, is depressed, worrying analysts and leading the government to accelerate stimulus measures such as the recent lowering of the reference rate for medium-term loans by the People's Bank of China ( the country's central bank), to encourage banks to grant more credit and at more advantageous conditions in order to affect consumption. However, these are buffer measures and it is only from a concrete restructuring of industrial plans and national investment policies that a systemic response to the employment concerns of young Chinese graduates can come. China certainly needs a new social pact for Xi Jinping's XNUMXst century, a pact which for now has taken on the high-sounding names of "Chinese dream" and "great rebirth of the Chinese nation", but which has contents that remain for today little more than programmatic declarations. After the XNUMXth Congress, Xi has all the power in his hands and has reversed the governance model inaugurated by Deng. Now the leader comes before the Party itself and indeed shapes it in the image of his own personality. It is impossible to try to answer today the question of whether Xi will be able to steer the country stably on a new path of economic development and to sign a new social pact, because the evaluation parameters are too numerous and of an extremely diverse nature. It is equally unlikely to imagine a sharp and definitive break of the social pact theoretically still in force, because that would really undermine any expectation of well-being and the achievement of status by the Chinese middle class. So the Chinese will still continue to believe in the new "Chinese dream", hoping to be able - in the medium term - to see its contours defined along the new lines of development of the Xi Jinping era".
How much do international tensions weigh on China, and in particular the open confrontation with the USA and the recent establishment of the anti-China trilateral agreement between the USA, Japan and South Korea which in September could extend to Vietnam?
«International tensions have a very considerable weight on China, also because the country has definitively abandoned the low diplomatic profile imposed as a dogma by Deng since the 90s in external relations to guarantee China a broad area of international dialogue that would facilitate attraction of foreign investment. Friendship with the United States is only a vague memory and today we are in the midst of the "wolf warrior diplomacy" inaugurated by Xi and led by his most loyal men in the Foreign Ministry such as the former spokesman Zhao Lijian. Every assertive action by the US must be matched by an equally assertive response from the Chinese side. In the context of Trump's trade wars and even more so today with the race to control super technologies, the Americans have put a lot of effort into drawing the image of the new Chinese enemy, then trying to impose it on the public opinion of all allied countries (even to the Vatican) with a view to an imminent clash of civilizations between the "free and democratic West" and "Chinese tyranny". Since the beginning of the war in Ukraine, there have been countless declarations by senior members of the American armed forces regarding the fact that this is only the first act of a war with China that will break out within the next fifteen years at the latest. They have even created a new playing field in the already delicate international risk, that Indo-Pacific area of international strategic interest which never existed until the moment in which the need was felt to contain Chinese expansionism and deploy the first acronyms of the western democratic bulwark: AUKUS, Quad and now the US-Japan-Korea defensive triangle. The Chinese response to this latest move was twofold: first the "wolf warrior diplomacy" spoke with the massive military exercises in the Taiwan Strait as a stern warning not to interfere in Chinese internal affairs (Taipei is China), now the BRICS summit in Johannesburg. Strongly inspired by Xi, the summit announced the expansion of the group to include 6 other nations (Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates), becoming, with 36% of world GDP, the main pole of a South-South political and economic cooperation system (increasingly indifferent to the Western vision of the world) and arriving - provocatively for now - at the announcement of the introduction of a new currency (R5) to be used as an alternative to the dollar in transactions between member countries of the group.
More than an improbable Lehman effect on the international financial system due to Evergrande, the whole world (and above all the countries that export a lot to China such as Italy) are alarmed by the probable drop in world trade deriving from China's economic slowdown : in the face of so many clouds, do you see any glimmers that could fuel the hopes of Italian and European companies of a return to normality of trade?
«The answer to this question is closely linked to the circumstances and international variables that we have just illustrated. It is not only China's economic slowdown that is causing a drop in trade, but also the realignment of various segments in a geo-political framework with strong economic repercussions. The so-called decoupling between the United States and China is already in an advanced stage, with the mutual exclusion of trade and investments from fundamental sectors such as communications or space exploration. Now the United States is quite openly asking various allied countries (such as Italy) to behave accordingly and to turn back the clock of history, to an exclusively Atlantic logic of trade and investment, coming to imagine alternative responses to the Belt and Road Initiative such as the phantom Build Back Better World at an all-American cost. Italy, which in 2019 with the Conte government had been the first G7 country to have joined the Belt and Road Initiative and which now with the Meloni government has promised the US a step back, finds itself having to try to implement a truly daring action: not renewing the BRI agreements with Beijing and at the same time guaranteeing a maintenance - if not a desired increase - in the volume of trade with China"
Do you think Meloni's balance can be successful?
“It's a bold attempt. Difficult. When Italy signed the BRI agreements in 2019, the greats of Europe, France and Germany, harshly criticized the Conte government's choice, defining it as a dangerous flattening of Chinese trade policies from which the European Union instead had to seek ever less dependence. The truth is that France and Germany were and are trading partners of the People's Republic of China far more important than Italy was and is not, and that perhaps more than anything else they feared economic repercussions on their domestic markets deriving from greater involvement Italian in trade with China. This is perhaps one of the most determining elements in attempting to answer the question: the deafening absence of a joint European trade policy, the absence of a third-party role for the EU in the US-China bipolar confrontation. The European Union is unfortunately still only a currency union. For the rest, only a sum of national interests and selfishness remains unwilling to merge into a joint and coherent economic policy. The fate of future economic exchanges between Italy and China are therefore entirely in the hands of Italy and its needs for political alignment with some states and the objective need for commercial exchanges with others. We will see if and how our country will acrobatically manage to keep its word given to Washington and maintain good relations with Beijing, dodging the blows of other European countries which, not having the embarrassment of having to dissolve their BRI commitments, will be much more free of us with respect to American requests and will certainly try to increase trade volumes with China as they have not offended it with an abrupt exit from the Belt and Road Initiative".
