Editorial | In China and the United States, political needs drive revival

Sin the newest economic blocs, the direction of the economy is currently controlled by politics, but there are at least some differences in the directions. The top decision-makers of the United States and China are rushing to support consumers, Europe seems to have neither the desire nor the ability to do so.

The US presidential election is less than a month away. The country’s economy is in a fine decline. Because of the election, it’s important how fancy it is.

The US economy is steered towards a soft landing by both the White House and the central bank. Although the US central bank, the Fed, does not do the election work of the Democrats, lowering key interest rates helps the current administration. Lowering interest rates is reasonable and quite harmless now that inflation is relatively well under control.

The central bank’s change of direction has irritated Republicans. Former President Donald Trump has interpreted that the lowering of key interest rates indicates the failure of the current Democratic administration: when economic policy fails, monetary policy has to be corrected. According to Trump, monetary policy has at the same time been harnessed to pull the Democrats’ electoral wagons.

Although there are always a few Trumpian lies, misunderstandings and exaggerations in Trump’s speeches, the easing of monetary policy does make voters’ everyday life cheaper and more comfortable during the elections. And if investing and managing loans becomes cheaper for companies, a few jobs will also be saved.

Some ports in the United States threatened to be blocked due to a stevedoring strike just before the election. The jamming of ports could have caused a shortage of some products, which usually increases prices.

The strike would also have been a political setback. According to newspaper reports, the current administration participated in behind-the-scenes negotiations that seem to lead to significant salary increases. In the labor battles that have already started, an extension of time will be taken based on the old contract until the middle of January – i.e. after the elections – in order to have time to agree on salaries in peace. According to the preliminary proposal, salaries would increase by more than 60 percent over six years. President Joe Biden effusively praised the agreement.

Qiina has developed a remarkable unwritten agreement in recent years. When the Communist Party offers economic growth and a rise in the standard of living, the people are satisfied with their lot, do not protest and accept the ever-tightening discipline.

The contract has begun to fray. China’s economic growth is still strong compared to, for example, Europe. However, the growth rate falls below the limit that the Communist Party considers safe. China’s economy has begun to be gnawed by deflation – a cycle of falling prices and wages. The problems of the economy have weighed on stock exchange rates, the housing market and citizens’ wealth values. In the eyes of the Communist Party, this means that the dangers have increased both in the economy and in politics.

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China is preparing for the US elections.

Last week, China built a stimulus package aimed at domestic consumers. The package of more than one hundred billion euros includes support for the real estate sector, money for the poorest, increases in public spending and support for the stock market. In the past, China has tried to curb spending in order to make the real estate bubble that has been simmering for years shrink in a controlled manner. Real estate risk is apparently smaller than general political risk.

QThe political economy of Iina and the political economy of the United States are connected. Relations between the two countries are tense, and China is preparing for the US elections. China’s central bank will keep the currency under tight control over the election, so that a possible Trump victory and Trump’s promised anti-Chinese import tariffs would not lead to a depreciation of the currency. Even if it were a political risk.

At the same time, in Europe, which has lost its growth, people argue about state subsidies, make several hundred-page reports about the needs of the economy and wonder where the other big economic blocs went.

The editorials are HS’s positions on a current topic. The articles are prepared by HS editorial staff, and they reflect the magazine principle line.