China’s Growth Model in Trouble: How Great is the Risk for the World Economy?

The year began with a glut of bad news about economic developments in China. What are the implications for Germany and Europe? In view of the overcapacity that has accumulated, Antonia Reinecke and Hans-Jörg Schmerer, FernUniversität Hagen, see a shift away from China’s established growth strategy as inevitable. The world economy‘s dependence on China, however, should not be overestimated. For Carsten A. Holz, Hong Kong University of Science & Technology, Chinese society is currently in a phase between two growth models. There is little room for foreigners in this new China. According to Frederik Kunze and Torsten Windels, NORD/LB, a downturn in China must be given more serious consideration as a potential risk factor in view of China’s importance to the world economy. Horst Löchel, Frankfurt School of Finance & Management, by contrast, believes that China’s economic policy is on the right path and that the risks for the world economy are manageable if there is no hard landing in store for the Chinese economy. For Markus Taube, University of Duisburg-Essen, the major challenge currently facing China is the fact that several of the pillars of China’s growth model to date are currently collapsing, calling for a fundamental structural fresh start. Overall, structural shifts can already be seen and further changes are to be expected in the future. However, Europe’s economies may be faced by a very different kind of shock at the end of this year. If the People’s Republic of China is granted the status of a “market economy” at this time, this will have far-reaching consequences for Europe’s competitive order.