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Hello and welcome to World Today.
I'm Zhao Ying.
Coming up, China's economic performance held steady in August despite headwinds and uncertainties.
What can we learn from the latest figures?
China launches anti-dumping and anti-discrimination probes into U.S. chips.
How should we interpret this move?
More than 100,000 people have marched through central London to protest against immigration.
What is fueling the far-right sentiment in the country?
China has released its latest economic indicators for August.
Official data show retail sales, a key measure of consumer spending, rose 3.4% year-on-year.
Industrial output grew by 5.2% in the same month, pointing to steady momentum in manufacturing.
Meanwhile, the average surveyed urban unemployment rate stood at 53 and fixed asset investment increased 05 in the first eight months of the year.
For more, we are joined by Dr. Yao Shujie, Changkong Professor of Economics at Chongqing University.
How would you characterize China's overall economic performance in August?
I think the economic development momentum is still very robust, especially the manufacturing and also the consumer demand.
These two major sectors, the growth is still very steady.
But there are some risks and also some weakness, particularly the overall investment.
The housing investment is still significantly negative.
And other investment, although they are in the very strong positive territory, but it's still very historically rather low.
So I think the driving factor for investment is still a major constraint.
And the consumer demand is still not very high, so there are still some difficulties.
But overall I think the overall economy is very steady robust, given the current challenges, especially from outside, and also the domestic structure transformation which is facing quite a lot of challenges.
I think China has to do a lot in order to maintain these kinds of growth momentum and also give some slight improvement in the rest of the year.
Well.
Industrial output grew 52 year on year, with equipment and high-tech manufacturing expanding even faster.
So what do you think is driving the strength in these sectors?
Yeah, I think the kinds of growth constraints which I just mentioned is basically due to not only the external factor but also the domestic structure transformation.
As you mentioned, the high-tech manufacturing sector, particularly the emerging industries such as 3D printing and new energy vehicle production robots.
These are the kinds of new emerging industries which are playing an ever-increasing role in terms of upgrading China's technological level, which is a very steady and also positive indication signifying that China's transformation is rather successful.
But in the meantime, I think we are facing challenges in the low-level manufacturing because China is moving from the low level to the high level and it may take some time, so the current challenges is still designed with the low level manufacturing.
How we actually gradually move from this low level, medium level to the medium and high level manufacturing and services.
This is part of the Chinese economy uplifting from a developing country toward developed countries, industrialized countries.
So it is a normal process, but it requires a lot of wisdom and also industrial policy to guide this process to a very successful outcome.
Well, the manufacturing purchasing managers index remains below 50.
I think it's 49.4, which means we are still in some sort of contraction.
So how would you reconcile this with the solid growth in industrial output?
I think, as I say, it's just mainly the labor-intensive low-skill, low-productivity sector which are adjusting downward.
So the pressure is there.
But the index you just mentioned is fairly steady over the last few months.
It's actually not deteriorating.
It means China is still performing quite solidly and fairly resilient to this kind of structural change.
Although the difficulty remains there.
So how we can accelerate the structural transformation, making the new emerging industry to become the pillar of the next economic development stage.
Yeah, and also retail sales still grew 34 year on year in August, although the growth slowed a little bit compared to 37 in July.
So what does this tell us about China's consumer demand and the effectiveness of policies to boost consumption?
Yes, consumption is not an isolated issue.
Consumption have to base on employment and also income generating capacity of the labor force.
I think the employment condition and also the macroeconomic environment is under stress, so that people are more reluctant to spend money in the consumption sector.
They are saving money for the better future.
How we can release the consumption demand to boost the short-term economy.
Dynamism is a key policy issue.
The central and local governments are using all kinds of policy mechanisms to boost the confidence of consumer demand.
But there is a limit on this.
The most useful policy outcome or policy methodology is to boost the income generation ability of the general public by creating more jobs, by investing more to the key sectors.
Now because the investment is slowing down, especially in the housing market.
It affects quite a lot of industrial sector in the market.
So people find it more difficult to make money, find it more difficult to get a decent job, which is understandable because of the housing sector is still under the deep process of adjustment.
And this will take some time.
So what the government can do is to create employment outside the estate industry, boosting services, especially for the manufacturing services agricultural, tourism and other services such as education and health care and elderly care.
So the government have to consider more ways of creating jobs and earning opportunities for the general public.
And this is going to be a short-term and medium-term policy concern for the Chinese economy.
0.9% year on year, but headline CPI fell 0.4%.
How would you interpret this next picture?
Yes, this is reflected by the sluggishness of the consumer demand.
3.4%, as you mentioned, is not a very high figure, although it is still a very decent figure.
But one main concern is that it may continue to drop.
So, this is reflected in the CPI, the consumer price index.
I mean, you know, suppliers and manufacturers.
In order to maintain the market share, In order to make sure that the factories are still in operation, people are still in jobs they have to cut the price.
So they all maintain a fairly low price level.
It's highly competitive at the moment.
So this is why the CPI is low.
But luckily, I think the CPI is still in the positive territory.
0.9% is much better than the 0%.
Now, the call figure is slightly negative.
This draws some concern for the local governments, how we can boost the consumer demand, and for the producers, how we can upgrade our product quality so that the price would be more robust to maintain the profit margin for the manufacturer in order for the supplier of commodity and services.
This again is another challenge for China, but I'm pleased that it's still in the positive territory.
China's exports grew 4.8% in August, while imports rose 1.7%.
What do these trade figures reveal about global demand and China's export competitiveness?
China is highly competitive in the export sector because China is producing high quality goods with decent price, which is much welcomed by consumers in the rest of the world, particularly the industrialized economy, who have the ability to buy the Chinese product.
There's a recent news that in Europe, for example, for every 10 new energy vehicles sold in Europe, four of them are produced in China.
This means that China is now getting into the key industrial sectors, such as the new energy vehicles, computer equipment and also automation equipment.
You know, laptop computers.
There are so many things that the rest of the world would demand for the Chinese goods, which is reliable, high quality and also the price is highly competitive in the international market.
For example, like new energy vehicles sold in China, the price is only half of the price in Europe, so it is highly competitive.
Now we have to continue to maintain this international competitive advantage to boost the Chinese economy in the medium and the longer term.
Well, looking ahead, what do you think are the major external risks that may challenge China's growth over the next few months?
The external challenges? is the US uncertainty.
The US is the biggest and most powerful economy in the world so far, and also for the near future.
Anything that the US do would affect the rest of the world.
Of course, everything that China does would also affect the rest of the world.
So, what China and the U.S., how they can cooperate or they can do things against each other.
There are different options and scenarios.
So the intensive discussion between the Chinese trade negotiator and the US trade negotiator, whether they come up to a constructive, conducive conclusion for both China and the United States, is one of the most important factors for the certainty and also for the prosperity of the global economy.
The other shock from Australia is that, because the global economy is still under recovery, I mean many, many countries are struggling to maintain a better employment, to maintain a job.
There's some countries, including Germany, which tends to be the growth engine of Western Europe.
Now the economic growth is slowed down.
The other factor is the war.
I mean, the Russian-Ukraine conflict. and also the Middle East.
So, in order to maintain the domestic growth and also provide some sort of global stability to the rest of the world, these are the two challenges for the Chinese government at the moment.
That is Dr. Yao Shujie, Cheng Kung Professor of Economics at Chongqing University.
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Stay with us.
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I'm Zhao Ying.
Chinese authorities have criticized the United States for abusing export control under the pretext of national security.
The statement follows the U.S.
Commerce Department's decision to put several Chinese entities on its export control list.
The Chinese entities include those from the semiconductor biotechnical, aerospace and logistics sectors.
The Chinese Commerce Ministry says Beijing opposes the US practice, which contains the growth of enterprises from many countries, including China, disrupts international business activities and undermines global supply chains.
The ministry says it has initiated an anti-dumping investigation into imports of certain analog IC chips originating from the United States.
China also announced anti-discrimination probe into related U.S. matters on integrated circuits.
For more.
We are joined by Dr Zhou Mi, Senior Research Fellow with Chinese Academy of International Trade and Economic Cooperation.
Thanks for joining us, Dr. Zhou.
Thanks for having me.
So what do you think are the real motives behind the US move to add Chinese entities in sectors like semiconductors, biotechnology and aerospace to its export control list?
And would you agree this is an overextension of national security concepts?
Definitely in my understanding that when the countries are using the export control, it should just focus on its original targets.
It has something to do with anti-terrorism or anti-abuse of the military weapons.
So when the United States are putting these companies I mean Chinese companies in that list, I think these companies are really outstanding companies in the related sectors.
So we cannot see or find any kind of threat based on this export control list.
I think that is a, you know, a symbol of a new change of the direction for US to put the Chinese company in the export control.
They want to compete with the Chinese companies.
I think that you know, in such a world when the export control is abused, I would say that will end so many uncertainty to the world.
So for the companies who are leading this development and the research, could they be possible to also benefit from this isolation?
I don't think that would be the case.
Even for those companies who are having the leading technology, they are not able to export to the market.
This definitely will also harm the benefits of those companies.
And I would say the abuse of the national security will caused so many troubles, not just for the Chinese companies but also for the United States companies and the companies in other countries.
Okay, so what practical effects could these US export controls have on those Chinese companies in the short term, especially in advanced chips and AI?
I think that it's maybe not so influential compared with the previous years because we are already seeing many of these practices are applied by the US government.
Recently, they have limited the export of the so-called advanced chips or AI-related technology to the Chinese companies already.
So for the exporters of the US, they have put it in a more cautious way on exporting the products to China.
So in the short term I think that the Chinese companies have to deal with these challenges.
I don't think that export control is a mechanism to refuse the export to China.
But those exporters they do need to apply for the permits from the commerce of the US.
That will end more cost of doing the businesses.
Well, could these sanctions unintentionally accelerate China's push for self-reliance in high-tech sectors and actually strengthen its innovation drive?
Definitely.
If you are looking at the chip related sectors, I think that semiconductor maybe a few years ago.
China is unable to produce any semiconductor because we are depending on the globalization and we are just playing our role in the market area and also in some of these application areas.
But when US said that they want to stop the exports or trying to limit the exports to China, many Chinese companies are really thinking that would be a very big opportunity for them.
And I attended several conference of the semiconductor.
When US said that they want to, can choose export to China.
The Chinese companies are real happy about that.
They're the producer of the related materials and they found that it has opened our very wide space for them.
Well for the companies who are using these chips.
Maybe they will suffer from the lack of enough shortage, but they are still trying to push more for the innovation and abilities improvement and that also giving a very strong support for those companies who are trying to do this research.
And we have to remember that it is not only just the United States companies can do that.
In the semiconductor areas, there are so many other countries.
They are involved in the globalization cooperation.
So if they are trying to do more, I think that is definitely will push another alternative for the development.
And the Chinese companies are really good at that.
Okay, then do you think this is going to have a big impact on the global semiconductor supply chain?
So will companies, you know, be able to find some workarounds?
Well, it will have a lot of impact, but I don't think that just this time for these actions to end more Chinese companies in this need.
I think that is the trend.
When United States has, you know, limited the, the percentage of the US made or US related materials to the export control.
I think that already gave a very clear signal that we have to do something else.
We have to prepare for the worst situation.
And that also provided so many opportunities for many other countries.
As we are seeing, the digital economy is quickly developed.
So many countries want to have a better position.
So China wants to share our technology and our abilities with them and then also on the other side to promote their abilities and also involvement in the related supply chain tasks.
Well, China's Ministry of Commerce has launched this anti-discrimination investigation into US measures targeting the integrated circuit sector.
On what legal basis can China build its case?
Well, they have pointed out that, according to China's foreign trade law, the government or the administration is responsible for managing this kind of behaviors when the other trading partners, they violated their commitments and discriminate the behaviors or activities with China.
So the administration is able to do that under the instruction of this law and they really are trying to do more to make it more clear about the process and the requirements.
Well, at the same time, Beijing has opened an anti-dumping probe into certain US analog IC chips.
How would you interpret this move?
Like, is this a direct response to those US sanctions?
Or do you think this could signal some sort of escalation in the US-China trade tensions?
In my understanding personal perspective, I don't think that, neither is the reason why we are trying to do that.
Actually, when the United States companies, especially those cheap companies, when they found that China's market is super large, they have tried very hard to have a better and a larger share of the market.
So they have used different policies to try to have a better position in China's market.
That is a kind of dumping.
So it's a legal obligation or a right for all the member of WTO.
They can do some kind of anti-dumping investigation based on the facts.
So we start this kind of investigation because of the requirement of these sectors associations.
They require us to do more to interfere with such kind of possible unfair effects.
So I would say that is just the start of the investigation.
We have to look at the fact and find out what is happening, what the US company has done and that impacts the benefit of the Chinese company, and then we can have the conclusion of this investigation.
Okay, so what does this trade relationship between China and US mean to other countries or multinational companies?
And could they be forced to take sides?
I think that maybe they have to just obey the market rules, no matter the country, whether it is strong or weak.
I think that the market rule is the basis for the people to interact with each other.
And, you know, for the trade, it's a short-term activity.
But if we are going to do more to consider about the global supply chain and industrial chains, We have to consider about a longer term of cooperation.
So the market needs more expectations about the certainty.
And based on that, I would say that they will choose, they will vote with their fate.
Okay, thank you, Dr Zhou Mi, Senior Research Fellow with Chinese Academy of International Trade and Economic Cooperation.
Coming up, US Secretary of State Marco Rubio is visiting Israel in the wake of the Qatar attack.
More than 100,000 people have marched through central London to protest against immigration.
And European Central Bank leaves rates unchanged as tariff fallout lingers.
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We'll be back after a short break.
You're listening to World Today.
I'm Zhao Ying.
U.S.
Secretary of State, Marco Rubio, has visited Israel as the Israeli military intensifies attacks on northern Gaza.
His visit proceeded despite President Donald Trump's anger at Israeli Prime Minister Benjamin Netanyahu over the Israeli strikes in Doha.
On Sunday, Netanyahu, Rubio and U.S.
Ambassador to Israel Mike Huckabee toured the Western Wall.
Netanyahu said the Israeli-American alliance is as strong and durable as the stones of the Western Wall.
For more.
My colleague Ding Hong spoke with Dr Wang Jin, associate professor with Northwest University in Xi'an, China.
So thank you very much for joining us today, Dr. Wang Jing.
First of all, do you think the Trump administration's purpose of sending Mark Rubio to Israel now is to showcase to the world that the Israeli-American alliance is strong and durable?
Well, I think it's one of the major objectives that Robio's vetted to Israel because, as you mentioned, there has been many rumors that the kind of the very clear division is growing between Israel and the United States.
And the trust from the United States towards Israel is also growing.
So that's why these rumors should be persuaded or these rumors should be dismissed.
And I think this is a very important objective of Robio's visit to Israel to show that the United States will continue to support Israel and United States relations with Israel is reliable, is reliant.
But on the other hand, I think another very important objective is that Robio hopes to to some extent try to persuade Israel not to take similar actions or take similar strikes against the targets with the close connections of United States allies in this region, because we know during the past several months there has been several similar cases, similar attacks launched and organized by Israel against the regional countries that could put the United States into the kind of dilemma.
And we know that in June that Israel launched attacks against Iran and dragged the United States into the war.
And this time Qatar is another important ally for the United States.
So I think the United States wants to persuade Israel to be more rational, to be more restrained, rather than to further escalate the tension in this region.
So that's why I think Rovio has two goals.
On the one hand, to send clear and positive signal to Israel and, on the other hand, try to persuade Israel not to be so aggressive.
So next week, the United Nations will hold what is expected to be a very contentious debate on commitment to the creation of a Palestinian state.
In this regard, do you think Rubio's visit is sending any message from Washington?
I think actually it will send a clear message.
And also we noticed that during Rubio's visit and his agenda in Israel he actually shows on a lot of occasions with Israeli military forces.
And also he visited the tunnels crossing between Israeli-owned territory and Gaza to show that Rubio acknowledged and would continue to support Israeli's very assertive stances in the Gaza Strip.
So I think from these kinds of messages sent from his trip that the United States will continue to support Israel and also will continue, maybe to some extent, oppose any kind of attempts from the United Nations to accept a Palestinian Palestine as a formal members of the United Nations.
So that's why I think Rubio's visit is actually sending the very clear message that the ties between Israel and United States will be protected, will be maintained.
And also, on the other hand, particularly on the diplomatic and the political dimensions, United States would stand closely with Israel.
I mean, particularly on a very public opinion level.
Now Qatar once again denounced Israel.
But on the other hand, Dr Wang Jing, why do you think Qatar has sent a message that Doha remains committed to working with Egypt and the United States to reach a ceasefire in this Israel-Hamas war?
I think, on the one hand, to organize this kind of a summit, I mean the Arab Muslim Nations summit, is to some extent the highest level of the reactions or responses from Qatar to the Israeli strikes, because Qatar does not have enough military capabilities to retaliate directly against Israel and Qatar does not have the political or diplomatic freedom actually, under the United States pressure, to give more retaliation activities on the diplomatic and political dimensions against Israel.
So that's why I think to organize such a summit would be the only solution for Qatar right now to show that they are angry and to show that more Islamic as well as Arab countries would stand closely and stand firmly with them.
But the problem is that, as you mentioned, qatar is still willing to continue their mediation efforts for israel and hamas war.
Because i don't.
I think they have no choice because, from the qatar's state nature, They are the very bridge for different divisions in the Middle East.
And they harbor different political descendants from other Arab as well as Islamic states.
And also Qatar always wants to, is willing to provide as a very important platform for different political organizations of different political powers, to dialogue, to discuss with each other for the possibilities of peace.
So that's why i think maybe qatar has already realized that they are under the big pressure But, given their nature, political nature as well as the political nature of willingness, the hope to continue to play a very important role for bringing peace between Israel and Hamas particularly, we know that the war is still going on.
The people there in the Gaza Strip are still suffering.
So that's why I think Qatar would continue very closely with United States, as well as Egypt, to reach a ceasefire as early as possible for Israel and Hamas.
Some people say the Doha attack has basically ended efforts to secure an Israel-Hamas ceasefire and the release of the Israeli hostages held by Hamas before this upcoming UN General Assembly session.
What is your take?
Well, I think that the ceasefire may be possible, but that would not be determined by Qatar.
And that would not be determined by the United States.
That would also not be determined by Egypt.
And we could also say it would not be determined solely by Israel or solely by Hamas, because we are talking about the kind of the to some extent bilateral dialogue for peace mediated by other sides.
So how to narrow down the divisions between the talking sides are very important.
And what we have noticed right now is that Hamas as well as Israel, their divisions are still very clear, and their divisions are so strong that it's very difficult to be narrowed within a very short time.
And particularly over the future structure I mean the political and the security structure in the Gaza Strip.
Israel maybe hope that Hamas role should be minimized and maybe should be eliminated totally.
But the Hamas perspective.
They still hope that they would use the Israeli hostages.
Captivate them as a very, very important part in your chips to force Israel to accept some terms to resume Hamas' leading role in the Gaza Strip and force Israel to withdraw from the Gaza Strip.
So these terms would not be accepted by Israel.
So that's why I think the divisions are still very clear.
Maybe that Qatar or other countries they hope to work harder to bring the kind of the ceasefire due as early as possible.
But given the very complexities, as well as the conflicting scenarios in the gala trip, I don't think that these things could work.
But everybody will work hard for that.
That is Dr Wang Jin, associate professor with Northwest University in Xi'an China, speaking with Ding Hong.
More than 100000 protesters have marched through central London in one of the UK's biggest right-wing demonstrations.
The United Kingdom rally was organized by anti-immigrant activist Tommy Robinson.
In the meantime, about 5,000 people took part in a counter-protest organized by Stand Up to Racism.
Twenty-six police officers suffered injuries as they tried to keep the clashing groups apart.
The authorities arrested at least 24 people.
The British government is facing mounting pressure over its tackling of irregular immigration.
More than 1000 migrants traveled across the English Channel on small boats last weekend, bringing the total number this year to over 30000.
For more.
We are joined by Dr Guy Burton, a fellow on the Sectarianism, Proxies and Desecretarianization Project at Lancaster University.
Dr. Burton, thanks for joining us.
Thank you for having me.
Yeah, so this Unite the Kingdom march was one of the largest far-right demonstrations in modern British history.
What is this reveal about public sentiment on immigration in the UK today?
Well, there certainly is real anger around immigration in the UK, but I think it's actually tied to a broader sense of drift that's going on in the country.
I mean, what we've had effectively is over a decade of austerity.
We've had rising living costs.
And we've now had for a year a Labour government which has been telling people that improvements will come, but it's going to take time.
And I think that's leading to a lot of frustration from the general public.
And the right has been obliging by supplying them with a scapegoat, which is foreigners.
Yeah, so you believe the root causes of this far-right sentiment is perhaps the economy pressure, rather than this cultural identity concerns.
So do you feel that these far-right groups are kind of exploiting the economic anxieties to kind of gain support?
Oh, absolutely.
I mean, if you look at immigration numbers, certainly they were climbing in the last few years after Britain left the EU.
That's when we had new immigration rules put in.
But what we've actually seen in the last year or so is actually those numbers starting to come down.
Many of those people that were non EU nationals that were coming into the UK.
They were coming to take the kinds of jobs that many Britons won't do working in agriculture, or in seasonal employment, or working in care homes.
And many of them also coming in on student visas.
But we're starting to see those numbers come down.
And yes, there is a lot of attention given over to these refugees coming over on small boats.
But, as you pointed out at the top of the programme, The numbers are actually very, very small as a percentage of the overall figures.
Yes, I mean a lot of this is down to sort of identity politics which is being exploited by the right.
But I think more broadly is this economic situation that Britain finds itself in.
You know, you also find as well that in many ways this is sort of tied in with sort of the broader right as well.
That's been going on.
We've been seeing, you know sort of the rise of a protest party on the right Reform Party, which is led by Nigel Farage and which is in fact challenging the more mainstream Conservative Party.
And then, of course, you've also got the right wing media, which is, I mean, much of the UK.
You know, this media establishment is right wing and the conservative, sorry.
The Telegraph, the Mail, and they're basically putting forward a lot of this kind of anti-immigrant sentiment as well.
Yeah, so I mean, are some of the demands by these protesters legitimate?
Like.
To what extent is this movement driven by legitimate political grievances versus extremist or conspirational narratives?
Well, I mean the YouGov, the polling company.
At the beginning of August, so last month, actually looked in at in some depth into how people understand immigration.
And what's quite striking is that the sentiment of those that are more supportive to these far-right movements, these anti-immigrants attitudes, tend to correlate quite closely to not knowing very much about the actual numbers of migrants that we have coming into the country.
I mean, I do think it's very much the case that, yes, there are grievances.
There is frustration.
I just think that the target is the wrong one here.
That really, what we've seen over the last decade and a half nearly two decades now is Britain's been going through the ringer.
I mean, we had the financial crisis in 2008.
The new government, the then new government that came in in 2010 introduced austerity measures.
We saw cuts in public services, less public investment.
Then since then, we've had the COVID.
We've left Europe following Brexit.
We've had the war in Ukraine.
We've had higher energy prices and inflation.
And all the while, you know, alongside this cost of living crisis, we've also not seen wages and salaries increase.
Well, there were also counter protests under banners like stand up to racism, and they are also gathering in large numbers.
But how effective are these counter demonstrations in challenging far right mobilization and shaping public discourse?
I mean one of the organizers of that, Diane Abbott, who's a left wing Labour MP or used to be Labour MP.
She mentioned in The Guardian this morning that the numbers for her counter-demonstration were much smaller than the Unite the Kingdom one.
But it is important that they're there because it's important to show the public and as through mediated, through the media, that there is a different position on this, that the unite, the kingdom, does not have the uh, the soul, the soul voice on all of this, because one of the problems that we have with the right-wing media is that they are, they can say very much, that these, these marches, this hundred thousand plus march, is the silent majority speaking.
The important thing is that these counter-marches show that that isn't the case and also it provides some backbone to the real political actors that can make a difference, that's government.
Well, Prime Minister Keir Starmer emphasized that peaceful protest is a fundamental value, but he also stated that Britain will never surrender to those far-right protesters who used the national flag as cover for violence and intimidation.
How would you interpret his message and what measures do you believe the government can do can take to prevent further far-right mobilization like this?
Well yes, Starmer's words at the weekend were a little bit firmer than before, because he has actually wrapped himself up in some of this language about the flag in previous weeks, which has led some people on the left to despair.
I mean, but the fact is is that the Labour has not really been taking the fight on anti-immigrant sentiment.
In many ways, what it's trying to do is to outflank, reform this protest party that I mentioned on the right, by being as hard on immigration, if not harder.
I mean you saw this earlier this year with the then Home Secretary, Yvette Cooper, with her immigration white bill was talking about making it much harder for immigrants to come in.
So what we do have is Labour's not really playing.
It's not really sort of taking a forceful stance in all of this.
And perhaps it's part to do with the fact that, as I said at the very beginning its story, its message seems to be things aren't great.
Just wait and wait and see.
Wait and wait a while and it's going to get better, which is not something that I think the general public is is willing to take anymore.
Okay, thank you, Dr Guy Burton, a fellow on the Secretarianism, Proxies and Desecretarianization Project at Lancaster University.
Thank you so much for joining us.
This is World Today.
Stay with us.
You're listening to World Today.
I'm Zhao Ying.
The European Central Bank has kept its benchmark interest rate at 2 for the second consecutive meeting.
ECB President Christian Lagarde said the decision reflected the health of the eurozone.
The decision was in line with expectations as the ECB looks to gauge the impact of the U.S. tariffs.
In July, the United States and EU struck a deal to impose a 15 blanket tariff on European exports heading to the US.
For more on this and the European economy.
My colleague Zhao Yang spoke with economics professor Yan Liang at Willamette University.
So, Yan, the European Central Bank has kept the interest rates unchanged at 2%.
Why did they make this decision?
Well, as you know, the ECB has lowered the interest rate for eight times in this year's time span, and they just started to stay flat since July.
So this is the second time that they made a decision to keep the deposit rate at 2%.
And this is largely due to the inflation situation in Europe.
Inflation is right now at around 2% at their medium target.
And they also project that the interest rate is going to continue to decline to about 17 next year.
And it won't increase until 2027.
So this gives them the confidence that the rate can be left.
The interest rate can be left at this current rate.
So this seemed to be a sort of Goldilocks place where the economy is not too hot, not too cold and the interest rate is comfortably at that 2 level.
That said, I think there are some skeptisms, that there are economists who worry that both the trade frictions but also the increase in European defense spending this could pose some inflationary pressure down the road.
And you mentioned the trade deal with the United States.
So to what extent are the U.S. tariffs reshaping the European economy?
Are we looking at a short term shock or a deeper structural challenge?
Well, I think it's definitely, you know, it actually has, I think, both impacts.
In the short term, this has sectoral impacts when it comes to, for example, automobile sectors.
This 15 would definitely undermine its competitiveness when the European automakers are already struggling, you know, with declining sales and rising global competition.
Not to mention, I think the European economy has been pretty lackluster.
So that 0.3% or 0.5% not on the GDP, it's not a very insignificant one, I would argue.
But again, I think overall this would mean that the European economies would need to both strengthen the domestic demand but also look for alternative trading partners, because this just shows that the United States could be a very unpredictable trade partner because, after this trade deal has been reached, Trump again threatened to sanction the EU officials or raise more tariffs because of the Digital Service Act.
So I think you know, for EU, this is a wake up call that they need to.
Both, you know, try to get their domestic demand strengthened, but also, you know, find other trading partners.
And let's talk about the UK.
The July growth was flat with manufacturing dragging.
So is this simply tariff related or is it more deeper, you know, competitiveness issues?
Well, I think it's a matter of both, even though UK is not getting a high tariff rate.
But still, I think, because of uncertainty, because of global supply chain shifting and because of these kinds of you know trade barriers, it definitely affects the UK's economy.
But I think UK has been, I think in some ways really, in the past few years, even decades, especially after their exit of the European Union.
This disintegration of the global economy is definitely a drag on their economy.
Not to mention, I think they have been really focusing a lot more on financial services and other service industries, without much attention to the service, to the manufacturing sector.
And they're lacking in larger scale of public investments to boost their manufacturing infrastructure and also upgrade their technologies, especially digital technologies applied to the manufacturing sector.
So I think there is a deeper competitive issue, as you just asked, that it's not just due to the tariff, but definitely tariff is a worsening factor to the already weak manufacturing capacity and its general economic growth in the UK.
And France is now facing the fiscal problem.
The Fitch agency downgraded France's credit rating on Friday.
It also said France's debt mountain would keep rising until the year 2027 unless urgent action was taken.
So how serious is the France debt problem?
And what does it mean for the eurozone?
Well, I think.
First of all, France's fiscal deficit is projected to be five point eight percent, which is above the three percent limit under the European Union rule, and its deficit to GDP ratio was also much higher than the 60 as the European rule.
Now that said, I think France is not the only one.
Its budget is largely worsened because of the COVID pandemic and also energy crisis.
So in Europe, Greece and Italy also shares similar problems, when Greek and Italian's debt to GDP ratio were actually higher than France.
But I think the problem is that France does not have a sort of an independent central bank that will be helping with its fiscal deficit.
In this sense, ECB would not just go ahead and purchase the French government bonds to be the market maker to help to reduce the bond yields.
At this point, French government bond yield has risen.
So I think this is the challenge when you are operating on a common currency under the regulation of one single central bank, without your own central bank.
That would help to coordinate with the fiscal spending.
But that said again, I don't think that French is really facing a crisis per se when it comes to its fiscal deficit or debt.
It definitely will be.
You know you would like to see rising bond yield and so on, but it's still relatively low, around 34 percent at this point.
But I think the problem is first of all, they seem to have no very clear idea of how to deal with the fiscal problem.
So, as you know, the prime minister basically proposed to do away two public holidays and reduce 44 billion euro government spending.
And that is definitely against the public will.
Not to mention I think there is a very divided parliament where there's no any party that has the working majority.
So that means it makes it very difficult to come up with collective actions to really try to genuinely find ways to deal with rising fiscal spending, rising fiscal debt problem.
So I think again, there are domestic issues, largely a political issue, but there's also the ECB set up that I think undermine the French's monetary autonomy.
So those are really the problem.
And when it comes to the implication for the broader Eurozone economy.
As we know, Germany and France are really the locomotive of the European economy.
If France continues to struggle with its debt and deficit problems, it will reduce its stimulus or its fiscal boost for the economy.
And so that could drag on its economy.
And therefore, I think this is not conducive to the entire eurozone's growth.
And you mentioned Germany has been the industrial engine of Europe.
So what's the situation of Germany's manufacturing base in this tariff driven environment?
And what sectors will be most hardly hit?
And what can they do to avoid the economic slip?
Well, I think Germany's economy is also, I think, having some kind of problems, right?
Because the economy actually shrank by 03 in the second quarter, you know, from April to June this year, compared to the previous quarter.
So this is relatively, you know, really a lackluster growth.
And that, of course, contributed to the entire Eurozone's growth.
So for Germany again, I think the problem, as we mentioned in the past, that both has structural reasons and also more of a contemporary reasons.
Due to the Russian-Ukraine conflict, Germany's energy prices have gone out by a lot.
And so that really undermines manufacturing competitiveness.
And as we also know that the German economy was largely dependent on trade, on exports.
And so these rising trade tensions, imposition of tariffs from the United States And the rising global competition also drag on Germany's manufacturing competitiveness and its capacity to lead the rest of the economy.
And last but not least, I think you know, as we also know, that German's government is very conservative in the fiscal stance and therefore they have been really trying to scale back on public investments.
And, as a result of that, I think they're lacking some very basic, you know, digital infrastructure and some other important infrastructure that would support manufacturing sector to grow.
And so, I think, combined all these factors, that's why we're seeing.
You know, German's economy struggled in the past few years and that is unlikely to change unless Germany really shift the gear, for example, to look for new trading partners, cooperate with China, for example, to revitalize and to reform its automobile industries, but also try alternative energy sources and reform their fiscal policies.
So it is, you know, of course, easier said than done.
But I think, you know, that's really the struggle that Germany is going to have.
And that would again have some negative implications for the Eurozone economy as well.
That is Yan Liang, economics professor at Willamette University, speaking with my colleague Zhao Yang.
That's all the time we have for this edition of World Today.
To listen to this episode again or to catch up on previous episodes, you can download our podcast by searching World Today.
And for further discussion, you can follow us on X at CGTN Radio.
I'm Zhao Ying.
Thank you so much for listening.
See you next time.
