Earth’s three largest economies and business powers — the United States, China and Europe — are walking a tightrope and in danger of falling into quicksand. Traffic in the middle of training has given them a winding road map that paints a more complicated horizon.
China’s Triple Jump to Regain Global Influence
Further
From the heart comes this explosion of new unsolved economic puzzles Asian giant. After the end of the criticized covid-zero policy, the second world economy did not grow with the expected force. Indeed, the market reading was “disappointing” due to a 6.3% rise between April and June, a far cry from the 7.1% predicted by its analysis centers. An unofficial target of 5% from Citigroup or Morgan Stanley is “at risk”.
Likewise, economic growth of less than 5% could displace the US from global leadership in an ambitious strategy by Chinese President Xi Jinping. To this end, he reshaped economic policy – aimed at gaining monetary and fiscal autonomy abroad – and reviewed his security strategy, promoting a global arms race, while transforming diplomacy with the aim of adding weight and alliances to the international order.
China’s recovery is threatened. Its gross domestic product did not grow a single point over the first quarter of the year, with dozens of cities under health movement restrictions. And what’s worse: It’s sinking into deflation — with the first gap since 2020 — and 21% youth unemployment, an unprecedented phenomenon in four decades of activity nearing double digits.
The acceleration of the pulse occurs despite the intersection of fiscal and monetary stimuli, however, masking many stormy peaks due to the double speculative bubble. In the wake of Evergrande’s protracted bankruptcy, the real estate industry’s first tie-in: Big Stock Not digested in a market that inevitably observes how households’ purchasing power declines. The second relates to the debt of local governments.
There are many voices warning Beijing, a cocktail reminiscent of the climate before the Lehman Brothers intervention. Subprime mortgages The housing bubble burst in the United States or Japan in the 1990s, sending the world’s third-largest economy to UVI for three decades.
In China’s case, the shock wave has been fueled by interest rates as high as 2.65% a year and Beijing’s reluctance to offer large state-owned banks up to 25 years to cover the financing needs of municipalities.
Ratings agencies that rule with an iron fist around the world—S&P, Moody’s and Fitch—have been sending warning signs since China’s municipal spending spree in the aftermath of the pandemic.
The halo of optimism goes through a resurgence in household consumption and corporate investment, which will boost activity and lift prices and kick-start the recovery engines, explains S&P’s chief Asia economist Luis Guijs. In this sense, it points to positive data of 3.1% growth in retail sales in June compared to 12.7% contraction recorded in May.
America, the economic double brake
In the world’s leading economy, prices have started to fall. Inflation stood at 3% in June from 4% in May. This is the twelfth consecutive month of decline, which suggests that inflation is on a steady decline. Even the core is on the verge of possible restraint in the medium term: 4.8%.
In parallel, employment has been sluggish, though not enough to neutralize an emerging labor market with labor shortages in certain sectors.
It’s the twin paradox of a Biden administration known for deflationary but capable job creation, brief episodes in its economy and a bullish rally by the central bank — which has raised interest rates five points in recent history.
The Bitenomics, A word in response to an intense disclosure campaign by the U.S. president’s communications advisers, various pieces of legislation in his executive order—specifically, billion-dollar investments in infrastructure, the JOBS Act, the CHIPS and SCIENCE Act, and the Anti-Inflation Act—will boost the business cycle. A year away from the 2024 presidential election, despite the protectionist bandwagon, Mr Buy American And this Bitenomics We managed to avoid recession last year.
“If the case arises, Biden will decide whether or not to end this game, and American allies will once again shake hands to cooperate with each other under frameworks of common interests that will transform the current global economic order,” says Peter Rasisch, director of the Geoeconomics Program at the German-American Institute.
Meanwhile, he will have to overcome the dark omens of economists like David Rosenberg, who characterizes the US situation as “the living dead” and expects a “hard landing” and a recession in the second half of the year, which has shrunk credit due to the “aggressive policy” of the central bank and is leading companies to a significant reduction in profits.
Wharton professor Jeremy Siegel calls Jerome Powell’s monetary tightening an “obsession” to control inflation, according to Moody’s chief economist Mark Jandy’s thesis that the central bank is “sacrificing the economy.” Nobel Laureate Paul Kurkman observes a phenomenon of inflation in the medium term due to a slight increase in unit labor costs, which the central bank “does not notice” despite the fact that it “destroys” the country’s industrial activity.
Europe, waiting list; Breath of Japan
Goldman Sachs analysts stress that both the US and China, Europe and Japan are keeping their economies underwhelming. True, “to a much lesser extent than during the great epidemics,” but with the impression that “they only stimulate demand in the short term,” Newman qualifies. If they make it through the summer with vigor, “they can find a stable path in the long run” because of the billions of resources they have amassed.
HSBC’s Frederic Newman notes BitenomicsBut also for Chinese programs with similar objectives, such as the US Treasury’s expansionary policy, European Next Generation Funds and continued stimulus programs in Japan.
In Europe, American and Chinese climates affect it greatly. An industrial shutdown pushed Germany into a tech recession in the first half of the year, with new disruptions in value chains stemming from competitive wars over technology and chips between China and the U.S. due to supply gaps for its powerful auto sector and its chemicals division.
Another button that shows geopolitical tensions are always more than a social club, however, remains the illusion that the ECB is calming down its monetary orthodoxy. Judging by some of his feelings Hawks Like the Italian governor Ignacio Visco, antidotes may be better antidotes Red numbers According to a Eurostat review, the EU is broken.
For its part, Japan is emerging from its three decades of flat encephalogram of gross domestic product, with deflation on the back of its domestic demand, which now contributed to a rise of 2.7% in the first quarter and 1.3% in the second.
With prospects of minimum wage -2.2%- and workers’ income -3.7%- increasing this year. It’s not enough for its central bank to stop providing monetary stimulus to its citizens with rates of 0.1% and inflation above 3%, but it excludes Japan from the cure for global economic ills.
