Elon Musk out to conquer China. SOEs’ debt weighs heavily on the public purse
Tesla sold 114,000 electric cars in China last year. However, its Chinese competitors are growing. Large state-owned enterprises are increasingly indebted. China’s debt-to-GDP ratio hits 275 per cent. Exports are growing, but are bound to slow once public handouts for the Covid-19 emergency end.
Beijing (AsiaNews) – Tesla electric cars are invading the Chinese market. According to the China Passenger Car Association, the big US manufacturer led by Elon Mask sold 114,000 new generation vehicles in China between January and November 2020.
The prospects for the new year are even better, after Tesla cut the price of its made-in-Shanghai Y model by 30 per cent, now priced at around 340,000 yuan (US$ 52,550).
Compared to its Chinese rivals, Tesla cars are proving to be more competitive and equipped with better technology.
Despite this, the three Chinese start-ups – Nio Inc., XPeng Inc. and Li Auto Inc. – have recorded strong sales in recent months; his, however, might be under threat as the Chinese government seems oriented towards paring back the subsidies that have favoured their expansion.
Chinese electric vehicles cover 10 per cent of the global market. UBS Securities estimates that by 2030 they will reach almost 50 per cent. Musk himself views Chinese automakers as Tesla's main competitors.
The growth of China’s hi-tech companies stands in stark contrasts to the difficulties of traditional state-owned enterprises, which have major debt problems.
Last year, Chinese state firms defaulted on 71.8 billion yuan (US$ 11.1 billion) worth of debt, with the government picking up the tab.
According to the Chinese Academy of Social Sciences, China’s debt-to-GDP ratio is set to hit 275 per cent for the whole of 2020. A year earlier, it was 245 per cent.
While Chinese state-owned companies remain a cornerstone of President Xi Jinping's economic policy, many observers see them as uncompetitive “zombies” that rely on government handouts, like those provided last year to fight the pandemic.
Should they default, the country's banking system would be at risk with consequences for the economic recovery.
Several experts also predict that the positive effects of tax cuts and government investments, adopted to overcome the pandemic crisis, will fade in the coming months.
This is especially true for exports, which in December recorded an annual growth of 18.1 per cent: significant, but less than the 21.1 per cent of the previous month.