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The Guardian
3 days ago
- Business
- The Guardian
World must be more wary than ever of China's growing economic power
China is pulling every lever at its disposal to counter Donald Trump's economic blockade, and it's working. Trade is recovering after the massive hit from Washington's wide-ranging tariffs on Beijing's exports. According to data provider Macrobond and Beijing-based consultancy Gavekal Dragonomics, exports to the US were down by about $15bn (£11bn) in May, but up by half that figure to other countries that trade with the US. Exports to African countries have also risen sharply. Meanwhile, Chinese officials are poised to strike deals to deepen economic cooperation with countries ranging from Brazil and South Africa to Australia and the UK. The latest addition to China's growing list of conquests occurred last week when its premier, Li Qiang, and Brazil's beleaguered president, Luiz Inácio Lula da Silva, signed a slew of cooperation agreements, including ones covering artificial intelligence (AI) and aerospace, further consolidating Beijing's Belt and Road scheme of tied investments. It matters to everyone that China's power and influence are expanding because the aims of its autocratic regime undermine the economic and political resources of the rest of the world. China might, by some, be considered the great provider, but its pseudo-communist regime is a malign actor on the international stage, much as Russia has become, and its search for ways to thrive must be strictly circumscribed. Without tough action, its voracious appetite for resources, information and intellectual capital will eat all of us. There are spies in every major university syphoning information back to Beijing about new developments and business opportunities. When intellectual property and patents can be hacked, they are duly stolen. Digital information is harvested on a vast scale and put into huge databases, waiting for developments in AI to allow for a more systematic analysis by Chinese officials. It might seem like a paranoid interpretation of China's day-to-day workings when Britons cast their eye over their own government and believe it barely capable of boiling an egg. China, though, is a very different place. Talk to local officials and you will quickly notice how concerned they are about the basics as much as they are about reasserting China's preindustrial revolution status as the world's greatest economic power. How to feed 1.4 billion people is a daily task and a constant worry. Nothing must stop the effort to keep the wheels of today's economy turning and the mission to usurp rivals such as the US and turn neighbours into supplicants. Australia's prime minister, Anthony Albanese, knows this ahead of a trip to three Chinese cities this weekend for talks about trade and investment and the UK energy secretary, Ed Miliband, understands how carefully he must tread when considering injections of Chinese cash and knowhow to build new offshore windfarms. What Beijing can offer is hugely attractive. It's not just the 10% depreciation in its currency against the dollar that makes its exports even cheaper than they were just a few months ago. It has cut-price digital infrastructure products that will transform an economy, an especially appealing offer to the industrialising nations also being punished by Trump's tariffs such as South Africa, Brazil and the Philippines. In the post-pandemic period of panic gripping much of the world, where the costs of making any kind of improvements are growing and government debts are escalating, China is one of the few big investors outside the Middle East with significant financial firepower. Cheap goods offset inflationary pressures while tantalising investments lure countries that Beijing knows are struggling to deliver on election promises. In this turbulent world, the UK, the EU and Australia can fend off China's demands for greater access in return for investment – primarily access to digital information. They can use polite language when they say no. Or they can cite China's alliance with Russia if they need a more forceful excuse. Beijing supplies Russia with much of what it needs in wartime in return for cheap oil. In this way it has embraced pariah status. Albanese says he will take back the port in Darwin from Chinese control. Likewise, Miliband should block Chinese investment in UK energy infrastructure. And David Lammy, the foreign secretary, should support planning objections to China's proposed new embassy in London, which the MoD has warned will be a huge spying station. Keeping China at bay when it has so much to offer won't be easy. It pays the wages of university lecturers by sending tens of thousands of students to the UK. It sends us cheap electric cars and much else from its vast warehouse of electrical and electronic products. That shouldn't be an excuse for adopting a breezy, laissez-faire attitude. We might not have wanted to take sides. There is no issue with the people of Russia and China, but their governments have forced us to be more independent, and take the financial hit that comes with that.
The Guardian
4 days ago
- Business
- The Guardian
World must be more wary than ever of China's growing economic power
China is pulling every lever at its disposal to counter Donald Trump's economic blockade, and it's working. Trade is recovering after the massive hit from Washington's wide-ranging tariffs on Beijing's exports. According to data provider Macrobond and Beijing-based consultancy Gavekal Dragonomics, exports to the US were down by about $15bn (£11bn) in May, but up by half that figure to other countries that trade with the US. Exports to African countries have also risen sharply. Meanwhile, Chinese officials are poised to strike deals to deepen economic cooperation with countries ranging from Brazil and South Africa to Australia and the UK. The latest addition to China's growing list of conquests occurred last week when its premier, Li Qiang, and Brazil's beleaguered president, Luiz Inácio Lula da Silva, signed a slew of cooperation agreements, including ones covering artificial intelligence (AI) and aerospace, further consolidating Beijing's Belt and Road scheme of tied investments. It matters to everyone that China's power and influence are expanding because the aims of its autocratic regime undermine the economic and political resources of the rest of the world. China might, by some, be considered the great provider, but its pseudo-communist regime is a malign actor on the international stage, much as Russia has become, and its search for ways to thrive must be strictly circumscribed. Without tough action, its voracious appetite for resources, information and intellectual capital will eat all of us. There are spies in every major university syphoning information back to Beijing about new developments and business opportunities. When intellectual property and patents can be hacked, they are duly stolen. Digital information is harvested on a vast scale and put into huge databases, waiting for developments in AI to allow for a more systematic analysis by Chinese officials. It might seem like a paranoid interpretation of China's day-to-day workings when Britons cast their eye over their own government and believe it barely capable of boiling an egg. China, though, is a very different place. Talk to local officials and you will quickly notice how concerned they are about the basics as much as they are about reasserting China's preindustrial revolution status as the world's greatest economic power. How to feed 1.4 billion people is a daily task and a constant worry. Nothing must stop the effort to keep the wheels of today's economy turning and the mission to usurp rivals such as the US and turn neighbours into supplicants. Australia's prime minister, Anthony Albanese, knows this ahead of a trip to three Chinese cities this weekend for talks about trade and investment and the UK energy secretary, Ed Miliband, understands how carefully he must tread when considering injections of Chinese cash and knowhow to build new offshore windfarms. What Beijing can offer is hugely attractive. It's not just the 10% depreciation in its currency against the dollar that makes its exports even cheaper than they were just a few months ago. It has cut-price digital infrastructure products that will transform an economy, an especially appealing offer to the industrialising nations also being punished by Trump's tariffs such as South Africa, Brazil and the Philippines. In the post-pandemic period of panic gripping much of the world, where the costs of making any kind of improvements are growing and government debts are escalating, China is one of the few big investors outside the Middle East with significant financial firepower. Cheap goods offset inflationary pressures while tantalising investments lure countries that Beijing knows are struggling to deliver on election promises. In this turbulent world, the UK, the EU and Australia can fend off China's demands for greater access in return for investment – primarily access to digital information. They can use polite language when they say no. Or they can cite China's alliance with Russia if they need a more forceful excuse. Beijing supplies Russia with much of what it needs in wartime in return for cheap oil. In this way it has embraced pariah status. Albanese says he will take back the port in Darwin from Chinese control. Likewise, Miliband should block Chinese investment in UK energy infrastructure. And David Lammy, the foreign secretary, should support planning objections to China's proposed new embassy in London, which the MoD has warned will be a huge spying station. Keeping China at bay when it has so much to offer won't be easy. It pays the wages of university lecturers by sending tens of thousands of students to the UK. It sends us cheap electric cars and much else from its vast warehouse of electrical and electronic products. That shouldn't be an excuse for adopting a breezy, laissez-faire attitude. We might not have wanted to take sides. There is no issue with the people of Russia and China, but their governments have forced us to be more independent, and take the financial hit that comes with that.
Mint
4 days ago
- Business
- Mint
Why so many Chinese are drowning in debt
THE RISE of a property-owning, entrepreneurial middle class in China has transformed its cities in this century. It has helped to spur consumption in the world's second-largest economy. In May retail sales grew by 6.4% year on year—the fastest pace since December 2023—helped by state subsidies aimed at reviving consumers' enthusiasm. The government has even cautiously promoted borrowing in past years. But all this has created new risks. Along with car-jammed streets, glitzy restaurants and vast malls has come an invisible change that is no less great: soaring household debt. As a proportion of China's GDP, household debt has risen from less than 11% in 2006 to more than 60% today, close to rich-country levels. Lenders include state-owned banks and tech platforms. Between 25m and 34m people may now be in default, according to Gavekal Dragonomics, a research consultancy. If those merely in arrears are added, the total could be between 61m and 83m, or 5-7% of the total population aged 15 and older. In both categories, these numbers are twice as high as they were five years ago, the firm reckons. Amid high youth unemployment and a property slump, things may only worsen. Dealing with personal debt remains shameful and unfamiliar in China. But the government is struggling to help. It is already busy tackling debt throughout the system: local-government debt remains painfully high, and corporate debt uncomfortably so. Household debt is one more worry. It is not an imminent threat to financial stability. But it weighs increasingly heavily on the minds of middle-class people, inhibiting their spending and undermining a belief in ever-rising prosperity that the Communist Party sees as crucial to keeping its grip on power. Chinese households have a buffer: overall, their savings relative to disposable income were nearly 32% in 2023, according to JPMorgan Chase, a bank. That is far higher than the rate of less than 3% in America in the build-up to the global financial crisis in 2007. But in the boom years money borrowed for housing seemed like a one-way bet, especially as jobs were plentiful and secure. People grew accustomed to splashing cash from big online lenders such as Alipay and WeBank. Others borrowed to invest in family firms. Then came zero-covid lockdowns in 2020 and the start of the property crash the year after. Whatever the origins, debt trouble and interactions with cuigou, or 'pressure dogs" (aggressive debt-collectors), have been the fate of many. Start with property. Borrowing for housing made up 65% of household loans last year (excluding loans for business purposes). Most mortgage lending is done by government-owned banks, which have to be careful about how they get their money back from those unable to pay. The number of foreclosed residential properties listed for auction last year was 366,000, slightly up from 364,000 in 2023, according to China Index Academy, a private research firm. The number of people failing to pay their mortgages may be growing much faster. Regulators are wary of aggressive repossessions involving people's primary homes: they worry about triggering public protests. Banks may be mulling another problem. In today's depressed market, auctioning a property may not recoup the mortgage. Online lenders, which provide a more modest share of mortgages, can be far tougher about repayment. Spendthrifts are another group in trouble. Lily, a millennial in Shanghai, got into debt when her employer, a software firm, stopped paying her wages because of its own cashflow difficulties. She owed 30,000 yuan ($4,200) to online lenders. To help, she is dabbling in 'debt IP"—when people turn stories of ruin into a means of generating cash as online influencers. She describes her travails in short videos on social media, but hasn't hit the big-time. Some of the most popular accounts have hundreds of thousands of followers. 'Some people are even competing: 'Oh, I'm 10m in debt, I'm 100m in debt,'" she says. Now consider investment debt. In Hangzhou, Ms Bai used to run a big education business and took out personal loans of millions of yuan to invest in it. Many Chinese borrow to boost family-owned firms and lenders often require personal guarantees, putting households at risk if the ventures fail. At its peak, her business organised cramming classes for between 50,000 and 60,000 students at 30-odd tutoring centres, generating an annual revenue of 100m-200m yuan. Then came covid-19 and a political crackdown on crammers. She had to sell her house and car to pay the debt. Dealing with the banks was the easy bit, however. During the pandemic the government urged them to be gentle with debtors whose businesses had been affected by it; they agreed to waive tens of thousands of yuan in interest. The tough part was dealing with the pressure dogs hired by online lenders from whom she had borrowed money for personal use. They repeatedly called Ms Bai, her friends and her relatives, often from different phones so they could not be blocked. She is particularly angry about the harassment of her parents. 'In China", she says, 'we generally don't tell our parents about bad news, so they were very, very affected." Ms Bai became depressed and thought of suicide. Her husband divorced her. Regulations relating to the debt-collecting industry are new and patchily enforced in China. Rather than helping Ms Bai, a court put her on a 'social credit" blacklist, which meant she could no longer fly, use high-speed trains or stay at luxury hotels. So where can debtors find relief? Support groups for them have been growing online. Jiaqi Guo of the University of Turku in Finland has been studying one of them, called the Debtors Alliance, on Douban, a social-networking site. Founded in 2019, it now has more than 60,000 members. Dr Guo says users often discuss shesi, meaning 'social death". It refers to the destruction of relationships caused by 'contact bombing", as the debt collectors' phone calls are described. The government has tried to show a modicum of sympathy. Last year it banned debt-collection agencies from threatening violence, using abusive language or calling people at anti-social times. It also reminded lenders to protect personal information (presumably meaning stopping misusing contact details). But data-privacy regulations are loosely enforced in China. Complaints on the debtors' forum suggest little change in the collectors' threatening and intrusive behaviour. One reform that might help is a personal-bankruptcy law, of the kind found in rich countries, to protect debtors from claims that would leave them destitute. The lack of such legislation has fuelled the growth of online loan-sharks offering high-interest credit to desperate defaulters. In 2021 Shenzhen became the first city to introduce a bankruptcy law for individuals. But it has been used with caution. By the end of September 2024 more than 2,700 people had applied for bankruptcy protection under this law, but courts had accepted only about 10% of their cases. A few other places have been dabbling in similar schemes. But the government appears in no hurry: creditors are often big state firms. Officials worry that a national law might signal tolerance of reckless spending or speculative investment.© 2025, The Economist Newspaper Limited. All rights reserved. From The Economist, published under licence. The original content can be found on
Hindustan Times
08-07-2025
- Business
- Hindustan Times
Why so many Chinese are drowning in debt
THE RISE of a property-owning, entrepreneurial middle class in China has transformed its cities this century. It has helped to drive consumption in the world's second-largest economy. In May retail sales grew 6.4% year on year—the fastest pace since December 2023—helped by state subsidies aimed at reviving consumers' enthusiasm. The government has even cautiously promoted borrowing in past years. But all this has created new risks. Along with car-jammed streets, glitzy restaurants and vast malls has come a massive, invisible change, no less far-reaching: soaring household debt. As a proportion of China's GDP, household debt has risen from less than 11% in 2006 to more than 60% today, close to rich-country levels. Lenders include state-owned banks and tech platforms. Between 25m and 34m people may now be in default according to Gavekal Dragonomics, a research consultancy. If those who are merely in arrears are added, the total could be between 61m and 83m, or 5-7% of the total population aged 15 and older. In both categories, these numbers are twice as high as they were five years ago, the firm reckons. Amid high youth unemployment and a property slump, the situation will probably only worsen. Dealing with personal debt remains shameful and unfamiliar in China. But the government is struggling to help. It is already busy tackling debt throughout the system: local-government debt remains painfully high, and corporate debt uncomfortably so. Household debt is one more thing to worry about. It is not an imminent threat to financial stability. But it weighs increasingly heavily on the minds of middle-class people, inhibiting their spending and undermining a belief in ever-rising prosperity that the Communist Party sees as crucial to its grip on power. Chinese households have a buffer: overall, their savings relative to disposable income were nearly 32% in 2023, according to JP Morgan, a bank. That is far higher than the rate of less than 3% in America in the build-up to the global financial crisis in 2007. But in the boom years money borrowed for housing seemed like a one-way bet, especially as jobs were plentiful and secure. People grew accustomed to splashing cash from big online lenders such as Alipay and WeBank. Others borrowed to invest in family businesses. Then came zero-covid lockdowns in 2020 and the start of the property crash the year after. Whatever the origins, debt trouble and interactions with cuigou, or 'pressure dogs' (ie, aggressive debt-collectors) has been the result for many. Start with property. Borrowing for housing made up 65% of household loans last year (excluding loans for business purposes). Most mortgage lending is done by government-owned banks who have to be careful about how they get their money back from those unable to pay. The number of foreclosed residential properties listed for auction last year was 366,000, slightly up from 364,000 in 2023, according to China Index Academy, a private research firm. The numbers of people failing to pay their mortgages may be growing much faster. Regulators are wary of aggressive repossessions involving people's primary homes: they worry about triggering public protests. Banks may be mulling another problem. In today's depressed market, auctioning a property may not recoup the mortgage. Online lenders, who provide a more modest share of mortgages, can be far tougher about getting their money back. Spendthrifts are another group in trouble. Lily, a millennial in Shanghai, got into debt trouble when her employer, a software company, stopped paying her wages because of its own cashflow difficulties. She owed 30,000 yuan to online lenders. To help she is dabbling in 'debt IP'—when people turn stories of ruin into a means of generating cash as online influencers. She describes her travails as a debtor in short videos on her social-media accounts, but hasn't hit the big-time. Some of the most popular have hundreds of thousands of followers. 'Some people are even competing, oh, I'm 10m in debt, I'm 100m in debt,' she says. Now consider investment debt. In Hangzhou, Ms Bai used to run a successful education business and took out personal loans of millions of yuan to invest in it. Many Chinese borrow to boost family-owned firms and lenders often require personal guarantees, putting households at risk if the ventures fail. At its peak, her outfit organised cramming classes for between 50,000 and 60,000 students at 30-odd tutoring centres, generating an annual revenue of 100m-200m yuan ($14m-28m). Then came covid-19 and a political crackdown on crammers. She had to sell her house and car to pay the debt. Dealing with the banks was the easy bit, however. During the pandemic the government urged them to be gentle with debtors whose businesses had been affected by it; they agreed to waive tens of thousands of yuan in interest. The tough part was dealing with the pressure dogs hired by online lenders from whom she had borrowed money for personal use. They repeatedly called Ms Bai, her friends and her relatives, often from different phones so they couldn't be blocked. She is particularly angry about the harassment of her parents. 'In China,' she says, 'we generally don't tell our parents about bad news, so they were very, very affected.' Ms Bai became depressed and thought of suicide. Her husband divorced her. Regulations relating to the debt-collecting industry are new and patchily enforced in China. Rather than helping Ms Bai, a court put her on a 'social credit' blacklist, which meant she could no longer fly, use high-speed trains or stay at luxury hotels. So where can debtors find relief? Support groups for them have been growing online. Jiaqi Guo of the University of Turku in Finland has been studying one of them, called the Debtors Alliance, on Douban, a social-networking site. Founded in 2019, it now has more than 60,000 members. Dr Guo says users often discuss shesi, meaning 'social death'. It refers to the destruction of relationships caused by 'contact bombing', as the debt collectors' phone calls are described. As their numbers rise, the government has tried to show a modicum of sympathy with the plight of debtors. Last year it banned debt-collection agencies from threatening violence, using abusive language or calling people at anti-social times. It also reminded lenders to protect personal information (presumably meaning, stop misusing contact details). But data-privacy regulations are loosely enforced in China. Complaints aired on the debtors' forum suggest little change in the collectors' threatening and intrusive behaviour. One reform that might help is the introduction of a personal bankruptcy law, of the kind found in rich countries, to protect debtors from claims that would leave them totally destitute. The lack of such legislation has fuelled the growth of online loan-sharks offering high-interest credit to desperate defaulters. In 2021 Shenzhen became the first city to introduce a bankruptcy law for individuals. But it has been used with caution. By the end of September 2024 more than 2,700 people had applied for bankruptcy protection under this law but courts had only accepted about 10% of their cases. A few other places have also been conducting trials of similar schemes. But the government appears in no hurry: creditors are often big state firms. Officials worry that a national law might signal tolerance of reckless spending or speculative investment.
Bloomberg
08-05-2025
- Business
- Bloomberg
Odd Lots: How China Might Actually Handle a US Trade War
By now, everyone recognizes that the US and China are in the middle of a trade war, with the Trump administration having imposed tariffs of as much as 125% on Chinese goods. For an export-focused economy like China's, that's a big deal. At the same time, China is pretty much the only major country that's chosen to retaliate against the US with its own set of fresh trade restrictions. So why did it decide to reciprocate? And what's its negotiating position as the US and China head into initial talks? Can the Chinese economy -- and its policymakers -- withstand the pain of a trade war? We speak to Arthur Kroeber, head of research at Gavekal Dragonomics and a long-time China watcher, about how China might actually respond to the new tariff regime.
