China's economy is showing signs of stability, not a decrease, according to the head of Roland Berger, a global consulting firm.

In an interview with Nikkei Asia, Denis Depoux, one of Roland Berger's three elected global managing directors, shared his insights on the Chinese economy. Depoux, who oversees the Asia region at the German consultancy firm, characterised the current state of the Chinese economy as a "stabilisation" rather than a "slowdown."

According to Depoux, the Chinese economy is expected to sustain growth through trade with the Global South. China is already the largest trading partner of over 120 countries, including ASEAN nations like Indonesia, Malaysia, Thailand, Vietnam, and North Korea in East and Southeast Asia. China's trade growth with these countries is double-digit, Depoux noted.

Depoux also highlighted that China is emerging as a source of technological innovation in the automotive industry and machine tools. He further stated that China's growth rate of approximately 5% is "massive," equating it to adding one Holland every year and Germany in five years.

However, Depoux also pointed out that the Chinese economy faces risks such as a slowing recovery in the real estate market and weak consumption due to concerns over the aging of society.

Moreover, Depoux stated that a new trade war between the US and China could result in a 4% hit to the US economy's 2023 GDP and a 10% hit to China's economy, as predicted by Roland Berger. He also predicted that the relationship between the US and China "will, in any case, not get better" regardless of whether Joe Biden or Donald Trump wins the US presidential election in November.

Depoux suggested that companies in Japan and Western countries can derisk in China while still being part of its growth. He recommended implementing joint ownership, reusing the proceeds of their existing operations to finance further growth, and localising decision-making at Chinese affiliates.

Depoux also noted that Chinese companies are offshoring their production, either to access new markets or to take advantage of low labor costs. He mentioned that China is importing a lot of oil through Myanmar via pipeline, which reduces dependence on the Strait of Malacca and contributes to the "reality that is fueling the Chinese economy."

Investment flows from China to Southeast Asia are growing "massively," according to Depoux. He characterised the current state of globalization as "dual globalization" defined by two blocs. Depoux stated that China's economy is expected to become less reliant on exporting products to Europe, the US, or Japan and more dependent on the rest of Asia, the Middle East, Africa, South America, Russia, and other regions.

The article was first published on Nikkei Asia and is part of 36Kr's ongoing partnership with Nikkei.

China's economy is showing signs of stability, not a decrease, according to the head of Roland Berger, a global consulting firm.