What’s going on in China? Palestinian man and child injured in gunfire near settlement

The financial markets are nervous again. But the reason this time is not that a few half-strong MAGA Republicans want to plunge the US into national bankruptcy. Fortunately, this danger has been averted. This time the financial community is shocked by the latest figures from China; and these are indeed anything but pleasant:

Jamie Dimon, CEO of JPMorgan and currently the undisputed star of the banking world, even added fuel to the fire in an interview with Bloomberg TV. He warns of the “uncertainties” surrounding Chinese government policy. “The growing uncertainty does not only affect investments from abroad,” says Dimon. “It also changes the confidence of its own people.”

Only recently it looked this good. After the abrupt turnaround in covid policy and the lifting of lockdowns, the Chinese economy recovered quickly. However, this boom seems to have been a flash in the pan. Carlos Casanova, chief economist for Asia at the Union Bancaire Privée in Geneva, also explains in the Financial Times: “We had expected this to be the start of a new consumption and services boom, and that the new optimism would spill over into an upturn. of the entire economy would develop. That did not happen.”

Now China is not just anyone. It is still the workplace of the world. About a third of global industrial production takes place there. China has also been the engine of the global economy in recent years. More than half of the growth in international trade came from China.

It is therefore not surprising that the markets are already reacting. Investors are not only getting nervous, commodity prices have also fallen due to falling demand from China.

Geopolitical tensions don’t help either. The war in Ukraine and the Chinese side of Russia have further increased distrust in Beijing. The Wall Street Journal reports that US managers are increasingly looking for alternatives to Chinese suppliers. “Fear of military confrontation and growing security concerns have led US companies to rethink their dependence on China,” said the Wall Street Journal.

Until recently, the term ‘decoupling’ was even used. Meanwhile, however, the realization prevails that a complete decoupling of the Western economy is an illusion. The mutual dependencies are too great, and especially in the fight against global warming, we depend on China, for better or for worse. Almost all solar cells and most batteries are made there, and it’s where the rare earth metals come from, without which no smartphone will work.

Another reason why global warming cannot be tackled without cooperation with China is that the Chinese are now blowing most of the CO₂ into the atmosphere. “Without China, we can’t solve the problem of climate change,” China expert Joanna Lewis of Georgetown University explained in the Washington Post. “If we refuse to engage in constructive cooperation, we will never get the problem under control on a global level.”

Ursula von der Leyen, President of the European Commission, introduced a new term to the discussion during her visit to Beijing a few weeks ago: de-risking. This term has spread like wildfire around the world in a very short time. This means that the connection with China should not be broken, but that the risk should be limited.

What sounds good in theory is devilishly difficult to implement in practice. For example, how do you minimize the risk in the semiconductor war between China and the West? Jensen Huang, CEO of Nvidia, the youngest Silicon Valley prodigy, warns of “massive damage” if US chipmakers are banned from exporting their products to China. Military experts, in turn, warn that the United States will lose its technological lead if chips like Nvidia’s become available to the Chinese.

That the term de-risking replaces the term decoupling is a positive sign. It shows that, despite all the geopolitical tensions, the West and China need to find a level of cooperation – however modest. A decoupling, on the other hand, would lead to companies like Apple facing hard-to-solve problems and the German car industry going under. And then China would also have serious problems as unemployed young people.