Factory clothing workers in China
“State builds factories but does not manufacture efficiency”, warns the Financial Times. Excessive supply is a problem – but not the only one.
Warned him in an editorial that the China is still far from overcoming deflationAlthough the homologous inflation returned to positive land in June, for the first time since January, and advised a reduction in supply.
According to the editorial, published on Sunday, “Few believe that sustained prices growth is back”mainly due to Weak internal search.
Beijing has made efforts to encourage consumption, but will have to go furthernamely through the reinforcement of pensions e social benefits, to reduce the preventive savings of families.
The FT also underlines that the deflationary dynamics will not be fought if the Chinese Communist Party does not face the excess supply.
A deflation It consists of a drop in prices over time, as opposed to a rise (inflation). The phenomenon reflects weakness in domestic consumption and investment and is particularly dangerous, as a drop in the price of assets, as a lawsuit under credit, generates an imbalance between the value of loans and bank guarantees.
Another effect is to lead to the postponement of consumer and investment decisions as a result of lower pricing expectations in the future, and can create a price -descendant spiral and difficult to reverse, affecting the entire economy.
The risk of deflation in the Chinese economy has worsened in the last two years, raised by a deep real estate crisis, which affected investment and consumption, and excessive production capacity in various sectors.
Os Production prices are falling Since October 2022, in a context where Chinese factories reduce prices to maintain market share, both in traditional industries such as steel and cement, and in modern sectors, including electric vehicles, solar panels and artificial intelligence.
The British newspaper recalls that the Chinese president, Xi Jinping, And other responsible are denying external concerns about excessive production capacity to criticize domestic manufacturers by the Neijuan phenomenon (“involution”), Expression used to describe excessive competition in prices.
The editorial stresses that Beijing’s own policies fueled the problemwith the bet on “new quality productive forces”, focused on advanced technologies and new industries, to trigger a race to attract political support and local subsidies. The result is “a investment outbreak with excess duplications”, Leading to price cuts and accumulation of stored products, from electric vehicles parked in ports to semiconductors to unused artificial intelligence systems.
“It is becoming increasingly difficult for Chinese manufacturers to export this excessive productionAs business partners are more aware of the impact of importing cheap products on their local industries, ”says the newspaper.
Several of the major business partners in the Asian country, including European Union, United States, but also developing countries such as Brazil, have adopted protectionist measures, including increasing customs rates, and launched anti -dumping investigations against China. THE ‘dumping’ It consists of sale below production cost.
Financial Times argues that Beijing should limit “state generosity” and create a more unified national marketrestricting the distortive incentives of local governments. It also proposes to change the provincial goals, reducing the emphasis on Gross Domestic Product, and reinforcing the protection of intellectual property to encourage more innovative differentiation.
According to the editorial, Xi Jinping may try set production ceilings and press manufacturers to reduce the offer, but “Beijing will do well to realize that Your excessive support is the problem. ”
“The state can build factories, but cannot manufacture efficiency”points out the Financial Times.
