The Sound of Economics

The Chinese economy is at a crossroads. The investment-driven growth model, which the government had relied on for the last four decades, is running out of steam. Fiscal deficits are widening and public debt is rising. Furthermore, population aging is becoming more visible and the pandemic had some scarring effects which have taken a toll both on consumer and business confidence.
The very rapid rise in wages since the global financial crisis is pushing China to get ahead in its production capabilities so it will be productive enough to continue to raise wages and avoid the middle-income trap. Pressure on the economy is further intensified by the recent increase in geopolitical tensions and fears of decoupling between the US and China.
As the Chinese economy continues to decelerate, the central government is investing heavily in innovation, doubling down on research and development (R&D) spending and STEM-oriented human capital.
In this episode of The Sound of Economics, Giuseppe Porcaro invites Alicia García-Herrero and Robin Schindowski to discuss the challenges China faces, including three potential bottlenecks that might be hindering the translation of China’s innovation efforts into productivity growth, with a specific focus on whether Chinese growth can defy gravity.
Relevant publication

• Schindowski, R. and A. Garcia-Herrero (2023) ‘China’s quest for innovation: progress and bottlenecks', Working Paper 08/2023, Bruegel
• Garcia-Herrero, A. (2023) ‘Can Chinese growth defy gravity?’ Policy Brief 14/2023, Bruegel

This episode is part of the ZhōngHuá Mundus series of The Sound of Economics. ZhōngHuá Mundus is a newsletter by Bruegel, bringing you monthly analysis of China in the world, as seen from Europe. Sign up now to receive it in your mailbox!
This is an output of China Horizons, Bruegel's contribution in the project Dealing with a resurgent China (DWARC). This project has received funding from the European Union’s HORIZON Research and Innovation Actions under grant agreement No. 101061700.

Today, the mitigation of climate change is one of the most important issues worldwide. However, governments also need to prioritise geopolitical resilience and economic growth when designing their industrial policies.
In this episode of the Sound of Economics, Giuseppe Porcaro is joined by Philippe Aghion, Simone Tagliapietra and Reinhilde Veugelers to discuss what an innovative, European-level industrial policy would look like and how it could address all those competing objectives.
They propose that the EU should engage in ‘co-opetition’ with the United States and China, which includes co-operation and maintaining economic ties to facilitate global decarbonisation most efficiently. At the same time, they argue that investing in new technologies in the EU is key to ensure its competitiveness and economic stability.
Relevant publication:
Aghion, P., K. Ahuja, C. P. Bown, U. Cantner, C. Criscuolo, A. Dechezleprêtre, M. Dewatripont, R. Hausmann, G. Lalanne, B. McWilliams, D. Rodrik, S. Tagliapietra, A. Terzi, C. Trasi, L. Tyson, R. Veugelers, G. Zachmann and J. Zysman (2023) Sparking Europe’s new industrial revolution: a policy for net zero, growth and resilience.

Since the end of the Chinese civil war in 1947, Africa has been crucial to China’s foreign policy. First, China supported several African liberation movements during the Cold War. Second, in November 2003, the Forum for China-Africa Cooperation (FOCAC) was created to improve cooperation between China and African states and third, Xi Jinping announced China's Belt and Road Initiative (BRI) in 2013, which aimed to reinvigorate the old silk trading route along the East African coast. Furthermore, a relatively unknown fact is that China has made significant investments in Africa's digital space.
In this episode of The Sound of Economics, Giuseppe Porcaro is joined by Alicia García-Herrero and Iginio Gagliardone to talk about China’s image and digital influence in Africa. They discuss specific examples of successful and unsuccessful media narratives built by China and assess the role that Europe plays in relation to China and Africa's digital influence.

Relevant publication:

• The Belt and Road Initiative transformation makes it a more – not less- useful tool for China
• Imperial Remains and Imperial Invitations: Centering Race within the Contemporary Large-Scale Infrastructures of East Africa
• Comparing North-South technology transfer and South-South technology transfer: The technology transfer impact of Ethiopian Wind Farms

This episode is part of the ZhōngHuá Mundus series of The Sound of Economics. ZhōngHuá Mundus is a newsletter by Bruegel, bringing you monthly analysis of China in the world, as seen from Europe. Sign up now to receive it in your mailbox!
This is an output of China Horizons, Bruegel's contribution in the project Dealing with a resurgent China (DWARC). This project has received funding from the European Union’s HORIZON Research and Innovation Actions under grant agreement No. 101061700.

The Critical Raw Materials Act, proposed by the European Commission on the 16 March 2023, sets clear benchmarks for domestic capacities along the strategic raw material supply chain and to diversify EU supply.
In this episode of The Sound of Economics, Giuseppe Porcaro sits down with Bruegel researchers Marie Le Mouel and Niclas Poitiers to discuss critical raw materials and the role they play in the EU’s industrial policy, examining whether the proposed Act would help the bloc advance in its green and digital transformation.

In this episode of The Sound of Economics, Rebecca Christie sits down with Bruegel Senior fellow Zsolt Darvas and Jennifer D. Sciubba, President and CEO of the Population Reference Bureau from Washington DC. Together, they explore the findings of Darvas’ recent paper on the effects of demographic changes on public debt sustainability, which was presented at the informal Meeting of Economic and Financial Affairs Ministers on 14 September 2024. Darvas pointed out that countries will have to devote a much larger share of their budget for paying for pensions and health care and elderly care, and fiscal adjustments might not be enough to cover these. Sciubba emphasizes the urgency for policymakers to acknowledge the change in demographics and work toward actionable solutions.