Проблеми в Китаї, можливості для України: чому економічний спад у КНР може стати шансом для українців
One of the top topics in the global media in recent days has been the reaction of world leaders to the election of Donald Trump as President of the United States. While some are hopeful that this appointment will strengthen international cooperation, others are concerned about possible changes in the world order, stressing the need to protect Europe’s interests and strengthen its sovereignty, as well as to be ready to face the challenges that will arise from changes in international relations.
What kind of pressure is the eurozone expecting from the Trump administration?
As reported by Forbes.ua with reference to Reuters, ‘Trump’s relations with his European counterparts have been tense and difficult for much of his first term’. During the election campaign, Trump threatened a trade war with Europe and his intention to double or even triple import duties on European goods. During his first term in office, he pursued an America First policy, imposing restrictions on imports of European goods and duties on steel and aluminium, which prompted the EU to retaliate. Therefore, the current fears of European leaders about the upcoming changes triggered by Trump’s appointment are quite natural.
Back in September, in the midst of the US election campaign, EU leaders signed the New European Competitiveness Agreement, which was designed to bring the eurozone economy out of stagnation and narrow the gap with the US and China. The document was based on an economic report by former European Central Bank Governor Mario Draghi and envisaged deepening the single market, introducing innovations, reducing bureaucracy for start-ups and improving the investment climate. In his report, Draghi pointed to a lack of investment, dependence on energy and technology imports, and a lack of coordination at the EU level. He advised filling the €800 billion a year investment gap.
Draghi noted that Trump’s presidency would change relations between the US and Europe. He believed that the new administration would stimulate the development of the technology sector, where Europe is lagging behind, as well as innovative sectors and traditional industries, in which Europe exports the most to the United States.
Why Beijing fears Trump’s appointment
Among the leaders for whom Trump’s election has become a ‘bone in their throat’ is, for obvious reasons, Chinese Communist Party leader Xi Jinping. Trump’s election has caused concern in China because of possible changes in international relations and US economic policy. Beijing is taking specific measures to prevent the unpleasant consequences expected in connection with the return to power of the odious Republican leader.
Thus, China has announced another financial assistance package worth USD 1.4 trillion for the next four years. This initiative is in line with China’s plans to support the economy through subsidies to local governments aimed at mitigating the economic downturn. This practice helps to support infrastructure projects and boost national consumption, but it can also lead to an overheating of the economy. These measures are aimed at mitigating the threat of losing foreign markets and the problem of declining domestic consumption, which is under some control due to the policy of alienating earnings. This encourages citizens to invest abroad to avoid risks, but at the same time limits the purchasing power of the middle class.
China is trying to support its economy amid growing uncertainty on the global stage. This has two consequences. First, the strategy of government subsidies to the economy is always a failure, as it leads to poor quality investments and only exacerbates the problems. An example of such subsidies is investments in ‘ghost cities’. Secondly, Beijing plans to devalue the yuan, which could be a temporary measure to support Chinese exporters, but at the same time reduce the purchasing power of the population and increase inflation. China has already tried to use devaluation as an economic tool, but the consequences of such a policy can be unpredictable.
Such situations once again confirm the reliability of the US currency compared to other unstable currencies, such as the yuan, which naturally arises from the instability of the economy and institutions.
In September, investors perceived the pumping up of the economy with government funding as a positive step, but over time it became clear that these measures were superficial. China lacks a systematic and structured solution to its economic problems. This means that the country does not have a long-term strategy for sustainable economic growth.
The main problems of the Chinese economy include a lack of investment, over-reliance on energy and technology imports, and a lack of coordination at the EU level. Chinese brands are often dependent on government support, which leads to poor quality investments and the creation of ‘ghost towns’. The reputation of Chinese companies using stolen technology does create barriers to entry in Western markets. In order for Chinese brands to compete successfully in the international market, they must be honest, not dependent on the state treasury, not steal technology and play by fair rules. This will allow them to access new markets and strengthen their position on the global stage.
Consequently, China needs to address its economic problems in a systematic and structured way to ensure sustainable growth and competitiveness in the international market. This includes fair play, innovation, and independence from government support.
Secondly, the development of the internal capital of society cannot be hindered. The government is afraid, because the more capitalised a society is, the more independent it is, and this is not what the Communist Party wants. Currently, China’s economic policy is based on the fact that the money earned by citizens is alienated in some way and redirected to banks to further subsidise the economy and global economic expansion. However, this policy is causing many Chinese to feel compelled to leave the country, investing in real estate and assets abroad, particularly in Canada, to secure their financial interests and reduce risks.
In China, however, the number of investment options is limited, primarily in gold and other precious metals. Consequently, the average Chinese citizen is limited in acquiring resources and earning opportunities and is forced to reduce consumption. Obviously, it is difficult to trust such a system. The Chinese Communists have relied on consumption in other countries, where they are actively supplying solar panels and electric cars. But the strategy of consumption in other countries may also fail with the arrival of Trump. China runs the risk of facing a situation of limited domestic consumption, which will be compounded by limited foreign consumption.
Why this could be beneficial for Ukraine
The United States is now the main factor putting pressure on global commodity prices, particularly metals. A few years ago, they were the main consumers of these resources. As the US economy was developing at a rapid pace, energy consumption was also increasing, and demand for black gold was growing. But in recent years, the Americans have freed themselves from oil dependence, fully meeting domestic demand for hydrocarbons and even exporting them. It is likely that this trend will only intensify under Trump.
In a sense, it can be argued that the main factor influencing global oil prices is China, whose economy is deteriorating.
This will lead to a drop in oil prices, which will also affect Russia in the long run.
Theoretically, this will strengthen Ukraine’s economic position.
Tetyana Morarash
