Alicia García Herrero began her participation by explaining the two key aspects she would focus on during her intervention. First, she addressed the slowdown of China’s economy and how it is expected to evolve. To illustrate this, she recalled the speed of growth China has experienced compared to countries like Japan and Korea, along with the social challenges that this rapid pace entails. Secondly, she discussed the relationship between China and the European Union, highlighting the uncertainty surrounding these relations.
Regarding China’s economic growth, it is estimated that by 2035, the country’s GDP will reach 30 trillion US dollars, representing a growth rate of 2.04%. At that point, China could match the U.S. economy but not surpass it, as noted by García Herrero. She further explained that, starting in 2035, there would also be a divergence between China and the United States due to the effects of population aging. Thus, the expectations for China to surpass the U.S. in terms of economic growth by 2027 are unrealistic, according to the speaker. The current situation is not comparable to when the U.S. surpassed the UK in economic growth. In order for China to become the global leader, it would need to increase its GDP by 50% compared to that of the U.S. García Herrero emphasized that there are still years of ongoing strategic competition between the U.S. and China, and for China to gain an advantage, the U.S. would have to go through a major recession.
On the other hand, Alicia García Herrero pointed out that the idea that China has no debt is incorrect. The rising debt levels in China, especially after the impact of the COVID-19 pandemic and the government’s support measures in 2020, represent a significant obstacle to the growth and development of investment. Furthermore, China has also faced harmful interventionist measures. It is important to note that China’s debt is not external but domestic, supported by family savings. This is due to China not having an international reserve currency.
In addition to these factors, aging is a concern for China. The country’s population is experiencing rapid aging due to declining fertility rates and increasing life expectancy. The decline in fertility rates, which began in the late 1990s, ultimately resulted in a decrease in the working-age population after 2017. The impact of aging has been most strongly felt in rural areas, where many working-age individuals have migrated from rural to urban areas. This shift has helped mitigate the effects of aging on productivity and, therefore, on overall economic growth. García Herrero highlights that the negative impact of aging on growth will be significant after 2035, as no further urbanization is expected.
Regarding trade and investment relations between the European Union and China, García Herrero emphasized that the pandemic has led to a significant increase in the EU’s trade deficit with China, reaching 418 billion dollars in 2022. One of the factors behind this is the EU’s heavy reliance on Chinese imports for its transition to green energy, which has been further accelerated by Russia’s invasion of Ukraine. She explained that it is unlikely that this trend will reverse. In fact, this dependency has become even more evident in the EU’s transition to green energy due to China’s increasingly dominant position in renewable energy products, such as photovoltaic solar panels, which account for 87% of global production, and 89% of the EU’s imports.
On the other hand, China has become Germany’s largest trade partner for imports, while the United States remains Germany’s primary export market. Chinese imports, including those from the EU, have grown at a slower pace than global trade, and EU exports to China have underperformed globally. The main reason for the underperformance of EU exports to China lies in China’s rapid advancement and competitive capability in a wide range of sectors. Market forces, innovation, and industrial policies like «Made in China 2025» have contributed to this shift.
In the debate held after Alicia García Herrero’s intervention, important topics were discussed, such as the relationship between China and Russia, which is understood to be a relationship of convenience. Other significant topics included India’s position, its competition, and its relationship with China. There was also discussion about China’s long road to de-dollarization and the strengthening of the yuan.
Danela Bordones