EU leaders will stress their rising concerns about Chinese industrial overcapacity when they meet President Xi Jinping for a summit in Beijing on Thursday, amid signs China is pumping more funding into manufacturing. The EU is worried China is increasing its industrial capacity, particularly in renewable energy products, at a time when domestic demand is weak and other trading partners such as the US are limiting access to their markets. This leaves Europe as an important target for an overflow of China’s exports. “China’s trade deficit with us is growing. It’s just below $400bn at present. And as you can imagine, the doubling of the trade deficit within a matter of two years is a matter of great concern . . . particularly over its sustainability,” said a senior EU official ahead of the summit.
- Date Posted:
- December 6, 2023
We find that the impact of inflation on consumer sentiment fades out with a decay rate of about 50% per year, with a 10% inflation shock reducing sentiment by 35 index points in the current year, 16 index points the following year, and 8 index points the year after. The estimates imply that current sentiment is being dragged down by 16 index points by the inflation we have experienced over the last 3 years, down 40 percent from the peak negative impact of 27 index points in June 2022. If inflation next year slows to 2.5%, the negative impact on consumer sentiment from inflation would decline by another 50% relative to the current value.