China can seriously slow down the pace of recovery of the Russian economy. On Wednesday, may 18, warned the first Deputy Chairman of the Central Bank Ksenia Yudaeva at the conference Credit Suisse. According to her, the slowdown of China’s economy by 1 percentage point leads to a slowdown in the Russian 0.5 p. p. if our country will change economic course.
As explained by the Deputy Minister of Finance Maxim Oreshkin, the negative impact of China is distributed through three channels: direct trade, commodity and financial markets. However, direct trade with China is not so great ($ 63.6 billion in 2015), as the main partner of Russia is still Europe. But the deceleration of China could affect the European economy, and through it — in Russian.
But the main threat — slowdown of the Chinese economy may lead to a new collapse in oil prices up to $ 30 per barrel. Assessment Oreshkin, a decrease in prices by $ 10 per barrel slows the growth of Russia’s GDP by about 0.8 p. p. In this situation, according to Deputy Finance Minister, should build an economic policy “with the possibility of more bad growth or even recession in China”.
Approximately in the same line with the thinking at the International monetary Fund. At the end of February this year, on the eve of the meeting of Ministers of Finance and heads of Central banks G20 in Shanghai, the IMF has calculated that the slowdown in China’s growth by 1% causes a decline of GDP of the countries of “twenty” by 0.25%, and also causes a drop in commodity prices by as much as 6%.
What this means in practice is clearly demonstrated by the events of the beginning of the year. In the first half of January, the drop in the Chinese stock index by 6-7% resulted in the collapse of oil prices. And on January 26, after the failure of the Chinese indices, the price of oil has fallen from $ 32 per barrel to $ 29. And, it seems, the situation could be repeated.
Last weekend, Beijing issued macroeconomic report, then investors with new force have started talking about the risk of slowdown in the Chinese economy. The data did not justify expectations of experts. In April China’s industrial production gained 6% against 6.8% in March. Retail sales showed an increase of 10.1%, lower than in March of 10.5%, and remained at 11%. The most serious deterioration occurs with car sales. In April it was sold only 5.1% more cars, while in March the growth was 12.2%.
In March the index of business activity in industrial sector of China fell to 49 points, which corresponds to at least 2011, and the growth of China’s GDP in the first quarter amounted to just 6.7%, which is the worst figure for the last seven years.
How seriously hinders China, how much the weakening of its position has on the Russian economy?
— China slows down is not a standard scenario of a slowdown of the countries that has long been at the peak, — said the Director of the Center for strategic studies of China, the Russian University of friendship of peoples (RUDN), head of the Department of Oriental studies of the HSE Alexey Maslov.
— Normally inhibit the country after the most rapid increase of the economy — as was the case with Japan, South Korea, the countries of South-East Asia. But China is slow for another reason: its economic structure does not correspond to the new challenges of growth.
The problem of China lies in the fact that the state acts as the initial lender and the ultimate of all processes in the economy. Despite the presence of banks of different ownership forms, the state, in the end, allocates money and takes them. Accordingly, no market regulation of the macro-processes in China is not happening. As a consequence, the mechanism that allowed China to grow rapidly in the years 1990-2000, has ceased to be effective.
This suggests that the inhibition of China is a system, and it cannot be solved by making another small measures, such as regulation of monetary policy. First in China began to slow down industrial production in General, and now there is an active inhibition of the industries associated with the production and consumption of luxury goods. Meanwhile, these industries has enabled China to grow in recent times.
The fact is that in the 2000s the years of the Chinese rapidly grew rich, and as a result have been spending a lot of money on high-tech medicine, including aesthetics, luxury cars, including Chinese-made luxury items. But as soon as the people of China felt the deceleration of the economy on your wallet — and it happened in 2014 — they have to reduce purchases, thus further shrinking its domestic market.
In my opinion, while Beijing will not be solved by dramatic changes in the management of the economy, the deceleration will continue. Moreover, these changes rests not only in economy but also in the system of governance.
“SP”: — How serious is this situation in Russia is dependent on China?
— In my opinion, Ksenia Yudaeva disingenuous, establishing a direct dependence of deceleration of the Russian economy from the Chinese. In this particular case, rather, we are looking for excuses for their own problems. But, undoubtedly, the influence of the Chinese economy on the Russian very much.
The problem is that for several years Russia was deliberately tied its economy to China. For example, obtaining loans from China, which today has been reduced because money is needed by the Chinese. Or to Chinese goods, which now has risen, not only consumer goods, but also machines, various technological equipment. All of these products, the consumption of which taught the Russian economy, went up by 15-40%.
Finally, Russia is quite actively tied the ruble to the yuan, even switched to direct payments, than put themselves at the mercy and from fluctuations of the yuan. Now, by the way, the monetary authorities of China to discuss the question about further devaluation of the yuan, which, of course, it’s not helping.
The result is that Russia depends on China significantly, but to establish this relationship in percentage points is difficult.
“SP”: — How much can China slow down?
China today strongly inhibits. In 2016 the Chinese economy in a number of industries, most likely, will not show growth above 4% of GDP. Compared with 6.9% growth, which, until recently, had expected the Chinese authorities, this is a very serious braking. And it will continue in the future.
In my opinion, Beijing has 3-5 years to “reboot” the system of economic management. In particular, to carry out fiscal reform and to take measures for the return of capital to the country. If the Chinese authorities will, in time, around 2020 the situation is normalized.
If Beijing is not enough political will and determination, will or serious external counteraction, the braking of China can reach even negative values.
“SP”: — How can we solve this?
— The recipe is known: don’t keep your eggs in one basket. In other words, we should not focus in economic cooperation exclusively on China. We have long been proud that our trade with China is rapidly growing, but now it plays against us.
Moscow is now making the right steps, but belated, attempts to expand trade cooperation with Indonesia, Thailand, the Philippines. That is, with the solvency of countries, which are able to buy Russian equipment and supplies.
We, of course, so they want to get rid of the China. But, apparently, other partners, which could form a reasonable competition of China — primarily Japan and South Korea — hold from the Russian on the course, and to dramatically expand the cooperation is not going to…
— The whole world used that the last quarter century China has grown steadily, but the current slowdown is not an organic defect of the economic policies of Beijing, and quite naturally, ” says the former Chairman of the armed forces of Russia in 1991-1993, head of Department of world economy of the Russian Academy. G. V. Plekhanov Ruslan Khasbulatov.
— All developed countries passed the stage of rapid growth, starting in postwar Germany, Japan, and South Korea. As the technological maturity of the production factors inevitably fall, because the increased cost of labor, and begin to develop production with high added value. The same phenomenon, by the way, was observed during the period of Soviet industrialization — the growth of Soviet Russia in the 1920s reached 18-20% of GDP per year.
In other words, China is now quite naturally slows down, and this inhibition affects Russia, and Western countries. To the West, the Chinese put a huge amount of products, therefore, the level of interdependence of the economies of China, USA and EU is very high. It is no coincidence that the IMF believes that the slowdown in China’s growth by 1% causes a decline of GDP of the countries of “twenty” by 0.25%.
We’re in China almost nothing supplied, in addition to raw materials. Therefore, China’s influence on the Russian economy, on the one hand, restrictive in nature, but has a decisive, vital-important to us. And if China will slow down even more, we have much worse than the West.
The situation is compounded by the fact that because of the sanctions we are experiencing difficulties on the Western energy market. Until recently it seemed that we will be able with China to negotiate, and will increase the flows of commodity exports to the East. But this is not happening.
Note: despite the drop in the Chinese GDP, China does not reduce purchases of oil and gas. Reduced, unfortunately, the price of energy that makes our “March to the East” disadvantage.
In this situation we need not wait for the China slow down even more thoroughly, and to reform their own economies. But, unfortunately, the Russian government relies not on reform, and on the rising oil prices…
