Desires and reality in the global economy

After the UK's referendum on Brexit, the EU became very self-involved. In the wake of the US presidential election, it has been trying to review how Transatlantic relations may look in future. There is little talk about Europe's role in the world.

Growth mainly Chinese

Incoming US President Donald Trump, meanwhile, is also very self-involved, concentrating on the US but not its contribution to the world economy. Perhaps it makes more political sense to ignore the subject considering results from the US (and the EU) were so restrained this year. According to the International Monetary Fund's calculations, China contributed almost 40 percent of the world's economic growth this year - without foreign debt. The US, on the other hand, which has high foreign debts, contributed only 0.3 percent and Europe only 0.2 percent. China is growing 50 times faster than all developed countries combined. Absolute growth in China (6.7 percent) is nearly twice as high as in the US, whose economy grew by 3.5 percent in the third quarter of this year - a record in the past two years. Going by purchasing power, the Chinese economy is already bigger than the US, despite the fact that US citizens are more likely to have debts than Chinese citizens.

Yet, the idea that China would enter a crisis if it grew by less than 6 percent continues to persist stubbornly. Why is the case different for the US? Is half enough? What's certainly clear is that if China were no longer to grow, the world would slip into a nasty recession. If the US were to stop growing, the world could easily deal with it. The global economy would still grow by 2.8 percent. Without growth in China, the global economy would only grow by 1.9 percent. Moreover, this calculation does not even take into account the indirect influence that China has on the GDP of countries including the US, India, Germany or on the whole continent of Africa.

Germany growing thanks to China

November 2016 was one of the best months for German carmakers in China: according to the China Association of Automobile Manufacturers (CAAM), 2.94 million cars were sold, 16.6 percent more than in the same period the year previous. Never before had so many cars been sold in one month in China. In the first 11 months of this year, a total of 24.9 million cars were sold, significantly more than in the whole of 2015. A large part of the share went to German manufacturers.

Without China, the car industry would have to make do without its biggest market, which alone contributes to 20 percent of Germany's economy. What is the impact of China's slump on the wallet of a factory worker at Volkswagen or one of the German medium-sized companies that sell 40 percent of their goods to China? A conservative estimate would be that thanks to its imports from other countries China is responsible for another 0.5 percent of global growth. Incoming President Trump should take good note of this if he wants to create a new foundation for Sino-US relations. Beijing has much more room for maneuver than he does. Furthermore, these days Chinese citizens are much more patient with their leaders than US voters.

Frank Sieren has lived in Beijing for over 20 years.