China towards “Japanization”? With the credit crunch, multinational companies began to flee

China slowdown It is not a cyclical or temporary phenomenon, but it represents the end of an era for the world's second-largest economy, which was identified – incorrectly – as “Japan” in comparison to the most severe slowdown, which began 30 years ago, in the economy that was then the silver medalist among the economies of the planet. .

But when the recession started Japan Rich in terms of per capita GDP, highly urbanized, with excellent social services and a public debt in line with Maastricht standards, China remains a leading country. Generally poorwith an underdeveloped rural population, without decent health, education and pension systems, and a public debt that within a few years (according to IMF estimates) will exceed the Italian level.

The debts accumulated by the central government, local administrations and public bodies of different nature and purpose are precisely the anemometer that measures the strength of the strong headwinds that are pushing the Chinese economy towards the rocks or at least towards the broad. Dry banks.

China's meteoric success has been based on decades exportsAnd about low domestic consumption, financial repression, capital controls, investments, and low labor costs. But this model came to an end partly for structural reasons and partly due to political mismanagement. First, China's aging population and shrinking labor force are affecting labor-intensive industries. Second, rising wages and production costs have made China less competitive. Third, Environmental degradation caused by industrialization is no longer tolerable. Finally, the directives of Communist planners created great swamps of inefficiency, which attempts were made to remove through public subsidies, but which became increasingly illusory.

The greater the subsidies, the greater the scope of inefficiency, which leads to Chinese factories retaining excess capacity and huge production that they try to dispose of at prices achievable even in foreign markets, in the hope of being able to justify requests for public support to their political godfathers. In essence, there is a giant operation taking place in China dumping At the global level, which may lead to a bad end for Western countries exposed to unfair competition and for the coffers of the Chinese regime, where bills of exchange are relentlessly accumulating. To avoid “Japanese schizophrenia,” China must reverse its growth model by directing it toward domestic consumption and allowing it to do so. Broken business. But the prevailing ideology in Beijing has been encouraging blasphemy in the opposite direction, or rather for how long Xi Jinping He rose to power and accelerated the pace of rowing and injury.

China's debt Starch It has already followed the stimulus measures frantically adopted by the government after the 2008 global financial crisis, focusing mainly on building and construction. infrastructure Many of them are of little use. Realizing the distortions, the bureaucrats who control the fate of the economy launched a crackdown Reducing debt Extensive, but concentrated above all in the real estate where they were created bubble Biblical proportions. Credit constraints have had a showering effect in Scotland, mostly on construction developers, with negative implications for GDP and employment. But effect Reducing debt It has spread throughout the economy, especially manufacturing, retail and even… exports.

Basically the government's efforts To reduce bank credit (Including those provided by shadow financial institutions) have hindered access to credit, especially for private sector companies without distinguishing between healthy companies and those with no future. In short, the credit crunch under an inflexible system has thrown the baby out of the water trying to throw out the bathwater. To make the situation worse, the freeze on real estate projects also affected local administrations, which were financing their budgets from the proceeds of urbanization fees and other taxes without burdening the local government. with The end of construction madness Tax revenues also dried up.

In this already unpleasant context, two historic blows arrived in quick succession, one as a result of the other: Covid and deglobalization. The coronavirus and the ensuing lockdown have crippled the economy, but the worst result has been the awareness after decades of myopic acquiescence in the West that China and its value chains are best not to be trusted. Since then, the flight of multinational companies from China has begun, at first quietly, then with Rossini's escalation. And what is called Resettlement s com. friendshoring s Eliminate risks Which began as a trickle during the Trump presidency and is now a vernal river.

The Chinese government faced an economic freeze and Youth unemploymentNow, at the slum level in South America, they are formulating a complex game of equilibria, trying to maintain economic stability, while addressing structural imbalances such as excess capacity, debt, environmental degradation, and the collapse of foreign investment. But the communist butterfly, attracted by the reckless flame of growth that would catapult the regime to the top of the world, displacing the United States and the entire decadent capitalist West, will likely expire with its wings flapping. It burned painfully.