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The Chinese economy is losing steam
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The Chinese economy is losing steam
It’s remarkable how real estate bubbles always seem to burst in the same places: big city suburbs, abandoned farmlands and empty lots where rows of empty concrete shells rise above roads closed to traffic and cheerful billboards touting middle-class dreams. “Central Mansion,” announces one such billboard in a residential development about 30 miles (50 kilometers) from downtown Beijing. Unfinished projects stretch in every direction, including a cluster of apartment buildings owned by Evergrande, a Chinese developer that has the distinction of being the most indebted real estate company in the world, and that has now become the poster child for China’s deflated real estate sector. At the entrance to Evergrande’s Royal Peak apartment complex is a gatehouse where visitors have to scan a QR code to confirm that they are Covid-free. The empty buildings and the ubiquitous Covid checks, a product of China’s ambitious zero-Covid strategy, have come to symbolize the challenges facing the world’s second-largest economy.To get more china economy news latest, you can visit shine news official website.
The International Monetary Fund (IMF) warned in mid-October that the Asian giant’s economic slowdown is one of three major threats to the global economy; the other two are Russia’s invasion of Ukraine, and persistent inflationary pressure. The international lending agency based in Washington, DC cut China’s projected real GDP growth forecasts to 3.2% in 2022 and 2.7% in 2023 (down from 8.1% in 2021), according to the World Economic Outlook report released on October 11. This is well below Beijing’s target of 5.5% GDP growth for 2022 – when China stumbles, the rest of the world takes notice.
The IMF is not alone in its gloomy forecasts for China. The World Bank is predicting that the country will fall from its 30-year reign as Asia’s top economic locomotive due to global uncertainty, shrinking domestic consumption and declining exports. It is forecasting meager 2.8% GDP growth in 2022, which means that China will grow less than all the other countries in the East Asia and Pacific region for the first time since 1990. The World Bank’s economic forecast blames the same factors for China’s slowdown: anti-Covid measures that disrupt supply chains, industrial and service production, and domestic sales and exports; and a real estate sector hobbled by pre-existing difficulties aggravated by unsustainable debt accumulation by developers. On a somewhat positive note, the World Bank reported that the country’s “systemically important banks have limited, direct exposure to real estate sector lending.”
Other warning signs have been cropping up as the year goes on. Exports of Chinese goods have been on a downward trend. According to data compiled by Caixin, a Beijing-based business and financial news outlet, export growth dropped from 23.9% year-over-year in the third quarter of 2021, to 12.3% in July and August of this year. After three straight months of growth, service sector activity contracted in September, reported Caixin, as did the manufacturing activity index, which has now fallen for two straight months.
The world watched anxiously as the 20th National Congress of the Chinese Communist Party kicked off on October 16. Every five years, delegates representing the Chinese Communist Party’s (CCP) 96.7 million members convene to elect its leaders, and it’s widely believed that Xi Jinping will be reelected as the CCP general secretary for a third term, unprecedented since the days of Mao Zedong. In his opening speech, Xi defended China’s zero-Covid approach to the coronavirus pandemic and emphasized continuity rather than change. The anti-Covid strategy is a controversial topic for a pandemic-weary populace, and even sparked a rare political protest at Beijing’s Sitong Bridge on the eve of the National Congress.
China is one of the few countries that still maintains a strict zero-Covid strategy, which involves massive testing and total or partial lockdowns when cases are detected. In the spring, as most of the world removed their face masks and decided to coexist with the virus, Chinese authorities locked down Shanghai for more than two months. In September, more than 30 cities were under partial or total isolation affecting more than 65 million people. China has also strangled inbound foreign travel by requiring quarantines of up to 10 days to enter the country, restricting visas, pushing ticket prices into the stratosphere and causing frequent flight cancellations.