Fear of mass layoffs: China is more concerned with stability than with growth

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imago / VCG

In the past year, the Chinese economy has grown at a slower pace than in decades. And for the current year, the increase could be even lower. In view of the trade conflict with the United States, attention is shifting.

In view of the customs dispute with the United States and the slowdown of the global economy, China wants to set a less ambitious growth target in 2019. It is expected that the leadership of Beijing will only touch an increase in gross domestic product (GDP) from 6.0 to 6.5%, according to political circles.

In the last year, the government had set a target of "around 6.5 percent". This should have slightly exceeded them, with a growth of around 6.6%, as economists expect. However, this would be the smallest increase since 1990 in the long-standing turbo emerging market, which has now risen to the second largest economy. The concrete data should be published later this month.

China has to deal with the punitive tariffs arising from the trade dispute with the United States and a drop in domestic demand. The new growth target will be officially launched at the annual parliamentary session in March.

The labor market in sight

The fact that businessmen in Beijing now spend a target range and no concrete figure gives them more flexibility. According to an internal member, a GDP increase of over 6.5% would be "very difficult" to achieve. On the other hand, if the growth rate falls below 6%, the country could get into trouble.

"The pressure on the economy is pretty strong and the focus of policy is on stability this year and the next," said one of the people familiar with internal planning. In particular, the government has its eyes on the labor market in the country with billions of people. He desperately wants to avoid it in the context of the trade dispute with the United States for layoffs in companies

Ifo: China would be a loser in the commercial war

According to the Ifo Institute, China risks losing the long-term trade dispute with the United States: "A large-scale trade war, which would impose 25% tariffs on all Sino-US trade, would bring the damage China's annual economic performance to over 30 billion euros, while the United States would amount to only nine billion euros ", say Ifo experts.

In light of these risks, China wants to further increase domestic demand and also support the stagnation of the automotive market. Ning Jizhe, vice president of NDRC, recently declared that he wants to increase Chinese spending on vehicles and appliances, for example. This should also include the VW group, which relies on China as the future market for converting petrol into electric vehicles.

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