（原标题：SFC Markets and Finance | German Professor Horst L?chel: China is in need of a new growth model）杠杆股市

南方财经全媒体记者杨雨莱 广州报道

At the beginning of 2025, China's DeepSeek set the global stage ablaze. As DeepSeek propels the Chinese tech industry into a bullish trend, global hedge funds have poured into China's stock market at a fast pace. Since mid-to-late January, the total market value of China's onshore and offshore A-share markets has surged by over USD 1.3 trillion.

However, the global economy remains highly uncertain, especially in the face of headwinds brought by a series of policies from the U.S. President Trump. How can China sustain its growth momentum? Will the Chinese market become more attractive in the future?

Horst L?chel, professor of economics and co-chairman of the Sino-German Center at the Frankfurt School of Finance and Management shared his insights during the interview that China and Europe will have more possibility to build stronger trade cooperation to overcome the challenges brought by Trump’s policies.

For China’s economic growth, he suggested that China needs a new growth model. The first growth driver is innovation, which entails providing private entrepreneurs more room for development. The second driver is to encourage increased domestic consumption in order to stabilize the growth rate in the long run.

SFC Markets and Finance: As a fintech expert, how do you interpret DeepSeek’s rapid growth?

Horst L?chel: I think this is a great success for China's innovation policy, because it shows that even given the restriction from the United States to deliver some of the advanced technology, China seems to be able or part of China, China's private companies seem to be able to develop technology which are more or less on the same level playing fields as the U.S. one. So this is really a great success and shows what private entrepreneurship, of course, supported by the state as well, can arrange.

SFC Markets and Finance: Have you tried the DeepSeek by yourself?

Horst L?chel: Yes, I have tried the DeepSeek by myself, especially for writing. Of course I also use ChatGPT, but DeepSeek is at least on the same level playing fields at ChatGPT. 

SFC Markets and Finance: What are the potential challenges that DeepSeek and similar tech companies might face in the global market? 

Horst L?chel: We have to see how things developing further on. In Germany, we are part of the European Union, and in the European Union, the regulation is rather tougher than in the U.S., but also in China, especially in the personal data protection. So this is, of course, for the time it could be a challenge for China, of how to protect the data of users. 

SFC Markets and Finance: Why was DeepSeek born in China? What unique conditions and environment do China provide? 

Horst L?chel: The overall atmosphere for supporting technological development is very strong and very good in China. And this is now linked to private entrepreneurship. Because I understand this is a private company organized by a few students who developed for a long time this kind of technology, first in trading and now in language model. So this connection between the private spirit and private entrepreneurship supported especially by financial resources, by the state works very well.

SFC Markets and Finance: Under the tense and uncertain global economic environment, how do you view the growth of China's economy in recent years?

Horst L?chel: I think (China’s) growth is all right, 5%. We talk about the second largest economy of the world with 18 trillion USD GDP. So any growth rate means a massive amount of new numbers of GDP and income. For example, China is almost five times larger in the meantime than Germany, and also not so far from the U.S. So 5% is okay. Of course, we all know that there are some weaknesses still, especially with private consumption. But overall, I think it's all right. This growth rate, I think it’s still one of the highest in the world. 

SFC Markets and Finance: China is promoting the high-quality development. How do you interpret the high-quality development in China’s economy? 

Horst L?chel: I think, first of all, it's a right approach. You have to see China is now a middle-income country and the next step is to move forward to a high-income country. And the difficulty for high-income country is to have advanced technology. That means you get more advanced technology, which first of all, increase the value added of your production. And second, increase the productivity of the stuff, and both together means to increase the income per people. And this is the most important.

SFC Markets and Finance: How do you view the current state of China's industrial structure? What are the challenges we face right now? 

Horst L?chel: The growth could not be alone be driven by investment. This is the experience in advanced economies not only for decades, but for centuries. You need a certain amount of private consumption, which means household consumption. For example, in average of the world, we have a private consumption ratio compared to the national income of above 60%.

In China, the consumption as share of national income is below 40%. Even though the consumption is not really so much relevant for growth and not so much relevant for overall income, you cannot drive the whole economy by investment. 

SFC Markets and Finance: What are some potential measures that China could employ to further stimulate private consumption?

Horst L?chel: I think two things are crucial. First of all, to develop further on the social security system. You have a lot of precautionary saving things in China, that means people have to save a lot to protect against the risks of life, health insurance, unemployment, education of the children and so on. If the state provides more public services for the private households, that means they can spend more, and use more of their income for consumption and not for savings. That's the first one.

The second one is private household, especially in the rural areas of China should participate stronger on the overall income development in China. For a significant amount of households in China, their income level is still low compared to China's GDP, though there should be some redistribution of income towards private households in order to increase purchasing power parity. 

SFC Markets and Finance: How about the Chinese capital market? Is it becoming more attractive for global investors?

Horst L?chel: The Chinese bond market is in any case attractive because of the low interest rate, more attractive than the Western ones. And the demand for Chinese bonds, including treasury bonds, is high. And I think in recent weeks, not at least because of DeepSeek, the emergence of DeepSeek and other events, also the 5% growth rate last year are signs for international investors to return to China’s stock market. And if I see it right, the development in the Chinese mainland, but also the Hang Seng Index in Hong Kong, both indexes, especially for the tech companies, are improving very well in recent years. So the attractiveness of the Chinese market is increasing again, especially for foreign investors, but probably also for domestic investors. 

SFC Markets and Finance: By having innovation like DeepSeek, will the digital economy be more prosperous in China?  

Horst L?chel: I think for the digital economy, it's a bit like in Germany, the question is not so much about having some champions like DeepSeek, as they develop AI. What is even more important is to digitalize the manufacturing industry. So the industrial production has to be digitalized. This works very well in China for the automotive industry, not so well in Germany, but the overall industry has to get more digitalized. And given the massive manufacturing in China, this is a huge challenge, because also for some companies is not so easy to implement digital technologies because they are not familiar or they are not willing to spend, since labor costs are cheaper than to make a huge investment in digital technologies. But I think the digitalization of the manufacturing industry, is (one of) the most important challenges for China. 

SFC Markets and Finance: In your recent published book, you mentioned that China's economy is at a critical tipping point. What are the key challenges and opportunities for China as it transitions to a new growth model? 

Horst L?chel: I think this is a long-term challenge, not so much a short-term challenge. China is on the way to develop from a middle-income country to a high-income country. This is not easy, because the difference from a low to middle-income country is to make industrial revolution. That means bringing people from the agricultural side, farmers to the industry. But now to come to a high-income country, it's specially about the development of technology. And for the development of technology, China needs a new growth model, where technology and capital plays a stronger role than it was before. And for that, you need a lot of entrepreneurs, private initiatives and private investment. Because the private entrepreneurs and private investment know what the markets want to buy in advanced technology. The state can support that, but the state cannot lead that. The state doesn’t know. The market is more of the private entrepreneurship. This is the first for the new growth model, giving private entrepreneurs more room. And the second one is support, also from the state side, more consumption in China. So you have a second growth driver. Innovation is important to increase GDP per capital, and consumption is important to stabilize the growth rate in the long run.

SFC Markets and Finance: Looking to the next few years, what’s your prospect for China's economic growth? 

Horst L?chel: It is rather natural after 45 years of such a high growth in China that the growth rate is over time declining. The question is how fast it's declining. I would say if China can realize the growth rate between 4% and 5% the next five years, that is fine. If the growth rate is 3 to 4%, it's also fine. Because then you have already a living standard which is more in line with advanced economies. So we can also accept, a lower growth rate, but the potential is still high in China, because you still have a massive amount of people and you develop very much the technology side of your economy. The challenge, as you already mentioned, is of course, the international environment.

I just read in the morning newspapers here in Germany and probably you know that the U.S. is underway to skip the preferred trading relationship with China, which is a kind of a statues you have for good trade. So there is external pressure especially from the U.S. And this could be a challenge for China to stabilize the growth rate, especially in seeing last year, one third of the 5% growth rate was driven by exports. And if you have a backlash in exports, you cannot have so much growth internally, which is another reason to stabilize internal demand, for example, consumption demand in order to have more internal growth driver instead of external. But this is surely a challenge from the external environment. 

SFC Markets and Finance: In what ways can China address the barriers in international trade, and is the Belt and Road Initiative (BRI) likely to be an effective strategy?

Horst L?chel: I think two things are important. The first one is already underway since some years that is diversification. China should have more trade with Asia, more trade with the Global South, more trade with Latin America, with Africa. So they should substitute the loss of trade they have with the U.S., with these countries. China now can deliver advanced products at least for these countries. There could be a good business relationship with the Global South. They have also a lot of commodities and other important things. This is diversification.

This is the first one, and the second one is the European Union. We have to see that this change in international policy with President Trump is also very much a challenge for the Europeans. And this could also trigger Europe and Germany to have, again, a stronger business relationship with China. Because we are also affected from the restriction by President Trump and not only by the trade restriction, but also some political quarrels with the U.S. This is obvious that President Trump will make the transatlantic partnership between the U.S. and the EU not so strong in future, as he intends to do that. And this will bring the Europeans, including the Germans, more to China. So this is not too bad for China. So trade diversification with the global sides as the EU could be the measure for China to overcome the challenges coming from President Trump in the U.S. in the future.

SFC Markets and Finance: How will the Trump's policies influence the global supply chain?

Horst L?chel: The global supply chain will be negatively affected by tariffs policy of President Trump. The most negative impact are rising prices. We have already had a huge inflation here in Europe and Germany for some years, because of the energy prices and other reasons. But it's totally clear if we have a disruption again or friction in the supply chain due to tariffs, that means rising prices. And rising prices is bad for the people because then their money is less worth to buy some goods. This is for companies as well. For companies is also a problem, because they have to buy higher inputs. This will, of course, negatively affect the supply chain channel and the price level. So Europe and Germany are not interested in these things. Quite opposite. And this hopefully will also lead to increasing business with China. And of course, from a German point of view from our interest, we want also to export more to China. We import already a lot, but also export to China and so we are really interested to increase this business.

SFC Markets and Finance: You just have mentioned that China and Europe might have more cooperation opportunities in the future. How do you see the level of opening up of China and the attractiveness of Chinese market?

Horst L?chel: I think the global enterprises are very much interested still to invest in China, make foreign direct investments at factories, or make adventures with Chinese companies. This is, by the way, especially for multinational enterprises, and also they have massive investment. And for the big companies, in chemistry, automotive, electronic and car factories and so forth, they are very much interested to invest or even to increase their investment in China. Simply for two reasons.

First, a huge Chinese market. You have a strong middle-income class for 400 to 500 million people who have money, who can spend their money, who are interested in advanced products. We have nowhere in the world is such a huge market and this will increase in future.

And the second one is innovation. For example, the best example, of course, is German car industry, the electronic vehicles, and there is something to learn for the German car makers from China for the digitalization of cars as well. So to be part of this innovation driven economy plus a huge market is a strong incentive to invest in China. And I understood from the Chinese side that they are very much willing to receive all these kinds of investments.

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