China retires for strategy against the United States

Consumer spending in the People’s Republic represented 78.5% of the increase in GDP in the first 6 months of 2018 (+ 6.7% annual), which implies an expansion of 14.2 percentage points over the same period of the previous year (58.8% of the GDP increase).

At the same time, imports grew 11.5% between January and June, while exports showed a boom of 4.6%, a difference of more than 30% that has remained in the last 5 years.

In 2018, tariffs on imported motor vehicles have been reduced by 10 points, from 25% to 15%. This implies an incentive of US $ 6,600 million for the automotive purchases of the People’s Republic abroad.

China imports 1 million foreign vehicles per year, while it produced 23.4 million units in the domestic market in 2017, by far the largest market in the world.

The incentive derived from the reduction of tariffs has caused an increase of more than 20% in the imported vehicles in the first 6 months of 2018, almost entirely high-end products from Germany (Mercedes-Benz and BMW in particular).

The People’s Republic is the second commercial partner of the European Union and the main destination of its extra-European placements. There are more than 4,000 freight trains that have departed from 31 European cities to the Chinese market in the last 6 months. It is twice the total of trips made between 2011 and 2016, and would be 6,000 per year as of 2019.

The cost of rail transport from Europe to China is 30% less than the maritime one. That is why small and medium-sized European companies are the most favored by the transcontinental crossing through the Eurasian mass (“The Silk Road”). Especially those that sell parts and electronic components to automotive companies based in the People’s Republic.

Purchases abroad via Internet commerce (e-commerce) increased 116% in 2017 and reached US $ 8,950 million (a difference of more than 40% compared to exports), while luxury products (jewelry, fashion, food) climbed more than 200%.

Consumption in China is a new phenomenon in capitalism. Per capita income grew 8.1% in 2017 – the last 4 decades – and doubles every 8 years. But disposable income (which remains after satisfying basic needs) increases more than 15% per year; and amounted to US $ 6.9 billion in 2017, which would be US $ 13.8 billion in 10 years, a figure higher than the US. today (US $ 11 billion).

It is the work of the new middle class of 440 million people, with per capita income comparable to the North Americans (US $ 35,000 / 45,000 per year), which is the most digitized in the world.

The consumption boom in China unleashed a double phenomenon: the virtual disappearance of the current account surplus (9.9% of GDP in 2007, which would be negative in the second half of 2018), together with a spectacular rise in the deficit of the account services (US $ 265,000 million), the result of the 135 million Chinese tourists abroad in 2017.

The People’s Republic has now decided to withdraw in depth in the conflict with the USA, in which the domain of cutting-edge technologies (Artificial Intelligence / Internet of Things / robotization) is resolved, which are the ones that decide the power in the XXI century.

He warned that Donald Trump represents a new historical era in the United States. and in the world. The North American economy grew 7% nominal in the second quarter of 2017 (4.1% reduced by estimated inflation), with an unemployment rate of 3.8%, the lowest in 44 years.

The strategic goal of Trump is to create a free trade zone with zero tariff and without subsidies that covers all the advanced world, as shown by the agreement reached with Jean Claude Juncker, head of the European Commission.

Trump bets again on the primacy of the United States. in the global system, with military spending of US $ 700,000 million in 2018 and US $ 740,000 million in 2019, greater than the military expenditure of the rest of the world combined.

China respects power; and discounted the permanence of the US veto to its high tech investments in the US. (CfiUS). It assumes that the North American power now faces it in an incessant political, economic, and military bidding.

Hence his decision to retreat in depth against Trump’s offensive, and concentrate on home economics, betting once again -as Mao did many times- on time over space. Meanwhile, it concentrates its forces in promoting the qualitative change of its domestic economy, based on the formidable consumption boom unleashed by its new middle class. This is your main economic letter in the bid with the USA.