This time it was Beijing’s turn to reciprocate. Chinese officials took over the previously closed American consulate in Beijing. A few days earlier, the United States had given the Chinese consulate 72 hours to close the agency. The reason given was allegations of espionage. Meanwhile, President Xi Jinping met with the bosses of seven major companies last Tuesday, asking them to “act more patriotically” – whatever that means. It has been going on like this for weeks: the world’s two largest economies are slipping a step lower in the escalation spiral almost every day.
“We are only at the beginning of the escalation spiral between the United States and China. All of this is likely to get worse and there is no exit in sight, ”said Jörg Wuttke, President of the European Chamber of Commerce in Beijing. “It started with a trade war that has turned into a technology war, and the next could be a financial war.”
Republican MP Ted Yoho even predicted an armed conflict within the next three to six months in early July, in which “people will die.”
Just blaming Trump for this falls short. Even though Democrats and Republicans are currently arguing over just about everything about China policy, they agree.
While the geopolitical situation is rapidly escalating, life within China has largely returned to normal. If it weren’t for the fact that – wherever you go – three seats were taped up with a plastic tape, you might think that everything is back to normal. The cinemas in Shanghai and other major cities have reopened last Monday – after five months. However, only 30 percent of the seats can be allocated and no film can last longer than two hours. Travel within China is also possible again, but you definitely need a green health code and an appropriate app, says a businessman who has just returned from a vacation trip from Chengdu.
The Chinese economy grew 3.2 percent in the past quarter. This is more than any other country, but as little as it has been in decades. Jörg Wuttke believes the numbers are realistic. “In fact, the factories are running again.” Several German medium-sized companies also report this. Most factories are back to pre-crisis levels, albeit with the handbrake on. Sometimes workers are tested for corona several times a day. The fear of another closure is too great.
“However, production is one problem, demand is another,” says Wuttke. “Many Chinese are still holding their money back.” Sectors in which physical presence is irrelevant are doing well, including the booming tech sector in particular. However, tourism and the travel industry are still suffering.
“I didn’t do much in the past,” says Zhao Yashan. The 25-year-old is standing in the Shanghai Guansong dealership, one of the largest Volkswagen dealers in the city, and wants to buy her first car. It fluctuates between the trendy Lamando model and the cheaper “New Lavida”. “It is different now. Since the pandemic I have known that it is good to have some savings. “
Many Chinese think like Zhao. This is reflected in the not always trustworthy official statistics: the unemployment rate is low at 5.7 percent in June, but as with many figures from China, there are doubts. There are estimates that around 100 million people have lost their jobs due to the pandemic. Retail sales in June also fell 1.8 percent year-on-year as the only indicator. The main pillars of the upswing are the infrastructure and real estate sectors – two sectors that the country already has enough of anyway. Above all, the real estate market tends to overheat and is considered exaggerated, especially in southern cities.
Before the corona pandemic, the government in Beijing was trying to shift growth towards more consumption. This development seems to be interrupted for now. There is an excess supply that could have a global impact: “If the goods produced in China cannot be sold, an export avalanche rolls towards the world,” says Wuttke. “That in turn should lead to further trade restrictions in this environment. This is worrying. “
And whether the country has weathered the corona pandemic is also questionable. The June outbreak in Beijing was brought under control relatively quickly. However, Urumqi, the capital of western Xinjiang Province, has been reporting new cases for a few days. The country is still largely cut off from international air traffic. The cinemas that have just reopened may close quickly. Hong Kong is struggling with a third wave of corona infections and has raised the security level again.
Hong Kong’s Edward Tse still believes that China will emerge from the crisis stronger than the rest of the world: “The Chinese economy will recover faster. But of course it will still take a while to return to a pre-crisis level, ”says the head of the consulting firm Gaofeng in Hong Kong. “It will take time before GDP grows again by six percent.”