InVinoVeritas

Developments in China are going to become an increasing distraction from European domestic issues and the Chinese effect on the European economy risks being more profound than future Greek bailouts, for example.

Three successive devaluations this week risk making Chinese imports cheaper and more competitive and yet the slowdown in their own economy seems to be a direct result of them becoming less competitive in the global economy. Will we see Chinese companies relocating to Europe? Will we see European companies with substantial Chinese interests suffering from their slowdown? Will the slowdown become a crash?

What's the view of European members on this and, since we have one or two members in China, what is their fly-on-the-wall view?

Over to you.

EMR

Generally bad news,
The slow down in China has hit commodity prices, just look at what has happened to the Aus $.
Euro and UK exports to china are now more expensive while their products are cheaper.
The result as we saw at the start of the crisis was for companies to buy from China rather than locally in Europe.
There was a trend to move away from this but if Chinese products once again show a positive cost advantage this is not good news for Euro, UK manufacturing and employment.

Red Eric

A Chinese recession? Probably only last a day or two

GeniB

Whats a recession? The rate of growth in China has slowed from 14% to 7 % so it's slowed to a rate approx three times better than Europe.So their boom has been more of a bubble and is now slowing down to a still very respectable and more normal rate. It has of course affected commodities in countries like Australia ,Canada,Brazil etc but they were unsustainable. It would appear that China is simple smoothing out the fall for their own population,in particular the new middle class. A significant political group

InVinoVeritas

Funny how people believe the statistics coming out of China but not the ones coming out of Greece.

GeniB

Your right Vino!! Maybe it's a matter of might is always right?

amideislas

Aside from automobiles, I think it may be easier to count which European products are NOT manufactured in China (or Asia in general).

I have to agree with genieB that 14% was unsustainable. A correction was due. 7% is still rather impressive.The Eurozone after all, with all its recent efforts to stimulate growth struggled to grow 0.3% (annually) in the past quarter. No doubt that will be China's fault though.

InVinoVeritas

Well that's the weird thing isn't it.? We've gone through 2 or 3 decades of China taking over the manufacture of pretty much everything we buy and it's been given as one of the main reasons that the West went into recession and China boomed. Before that, back in the 70's, it was oil. In both cases, all the money we used to spend within our own economies was going off to countries who did not spend it on anything we had to offer in return. Eventually these profiteers started buying into the few industries which remained under our control.

But the situation has reversed now, the cost of production in China has crept upwards whereas ours, due to mechanisation and cheaper immigrant labour has crept down. The price of oil has crashed aded to which the oil-rich economies are struggling with mounting religious and political instability. So, do these events not provide an opportunity for the West and Europe, in particular, to boom again?

In the case of China we are being told that their growth is dropping from an unsustainable 14% to, a still enviable. 7%. Do you really believe that? If it's true why are Chinese property prices tumbling, why did they pass a law allowing their people to secure their stock margins with their own homes, why are they devaluing their own currency? Are these not signs of a bursting bubble?

And finally, many of us in our lifetimes have lived through 2 boom and busts. The Chinese have no experience of this. Like most Asian countries the concept of "face" is all-important, how are they going to cope with "losing face" in their first-ever crash. They can't even cope with losing loved ones in the MH370 crash!

Come on guys, get real. This is important stuff going on here. Even the ECB is worried about the effect it will have except that, so far, it's not having any effect. And that worries them even more because they are beginning to realise that they don't even understand what's happening.

Red Eric

Perhaps they should enlist the aid of a certain Greek ex Finance Minister to explain things to them - he always seemed to me to have a fair old grip on economics.

InVinoVeritas

Or perhaps the Chinese could hire him to run their economy

GeniB

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And finally, many of us in our lifetimes have lived through 2 boom and busts. The Chinese have no experience of this. Like most Asian countries the concept of "face" is all-important, how are they going to cope with "losing face" in their first-ever crash. They can't even cope with losing loved ones in the MH370 crash!

Not sure about their inability to cope with Grief there Vino.? If they managed to 'carry on' after losing 45+ million people during the long march under chairman Mao (isn't it the Japanese who are more concerned with' face' anyway?)

We lost our way with the importance of Manufacturing under Maggie.she was right to tackle the Unions,but not to refuse to support the companies ! The whole North /South divide of that period with the underlying disdain for anyone who worked in 'trade' did us no favours.Other European countries who pumped money into their car industries for instance have weathered the storm of that time much better than we did. If I remember rightly the term 'Market Forces' was bandied about quite a lot.in the UK Where as it might have been better to say 'Sack the old fashioned boss's and curb the pumped up Inions,start a dialogue which doesn't begin with 'Us and Them' and for God's sake spend money on modernisation...hmm..Do you think anyone during that period would have listened in the UK? They did in other parts of Europe .We reap what we sow.It's what makes me wonder how the UK will survive if it leaves the EU

iano

The full effects will take some time to pan out. For instance, there's been little reaction from China's competitors in the Far East thus far, i.e will they devalue too ? The so called currency war could impact greatly.

The US economy is currently better placed to absorb the export hit, not so good for the EU, unfortunately.

GeniB

I'm not clear as to how that pans out with the USA debt to China either.?.Only a few short yrs ago they were talking about the fact that China owned most of the US's debt..That the USA owed trillions of Dollars! That it would be impossible to pay it back..Then came Quantitive Easing and the story changed to ..The Chinese will find they are only receiving 50% of the debt in repayments and even that will go down over time.. Now it seems your saying the USA's economy will be better place to absorb this situation???.. Can any economic whizz kid out there explain this to me? Is it a chinese puzzle? Or a USA Fiddle? Whatever it is Greece should watch and learn

InVinoVeritas

China's neighbours have already noticed a rapid fall-off in Chinese tourist numbers - this on top of the previous drop in Russian tourists. As you so rightly say, there is a knock-on effect which will take more time to come through.

iano

The US economy is currently growing faster and in a healthier state than either the EU or China, therefore a modest increase in prices to compensate for fewer exports to China will have an effect, but not the effect you'd have in the EU upping the price of, say, a BMW in the Club Med marketplace. Simplistic I know, but you get my drift.

I don't think there's an economic whizz kid anywhere on the planet is there ? Don't remember any in 2007 !

They're all just winging it, what works for the US doesn't necessarily work for China, and vice versa, too many variables.