2023-08-26 11:11:12
After decades of economic boom that turned China into a global power, growth has begun to decline, which may enter the country into an economic recession that is difficult to get out of, according to the magazine “The Economist“.
Economic activity in China suffers from a decline in consumption in light of the difficulties faced by the labor market and the slowdown in the global economy, which weakens the demand for Chinese products and thus affects the activity of thousands of factories.
The same British magazine quotes some analysts as saying that they expect that China may enter into a deflationary trap, like what happened in Japan during the nineties of the last century.
Many of the country’s challenges stem from failures in its economic policymaking, which are worsening as Chinese President Xi Jinping consolidates power and short-term growth is no longer a priority for the Chinese Communist Party.
In another sign of the slowdown, loans to households fell last month to their lowest levels since 2009.
“A crisis of confidence”
In an effort to stimulate activity, the Chinese central bank again cut, on Monday, the interest rate on loans granted for one year, from 3.55 to 3.45 percent.
newspaper saysThe New York TimesAmid the bad economic news, a new problem looms: a crisis of confidence that has left consumers desperate.
Consumers are reluctant to spend, and companies are reluctant to invest and create jobs. Also, potential entrepreneurs do not embark on starting new businesses.
“Declining confidence is a major problem in the Chinese economy right now,” said Larry Hu, chief China economist at Macquarie Group, an Australian financial services company.
Speaking to The New York Times, he said, “The decline in confidence is feeding into a self-feeding downward spiral, as Chinese consumers don’t spend because they worry about jobs, while companies cut costs and are reluctant to hire because consumers don’t.” .
In the past few weeks, investors have withdrawn more than $10 billion from the Chinese stock markets.
On Thursday, China’s top securities regulator summoned executives of national pension funds, major banks and insurance companies to “pressure them to invest more in Chinese stocks,” according to the Chinese economic magazine Qiaxin.
More repressive on the inside and more aggressive on the outside.
newspaper saysWall Street JournalChina is “sinking into debt” and parts of it “are saddled with unused bridges and airports, millions of unoccupied apartments, and investment returns have fallen sharply.”
The newspaper reports the case of Yunnan Province in the southwest, which recently said it will spend millions of dollars to build a new quarantine facility for Covid, approximately the size of 3 football fields, even though China ended its “zero Covid” policy months ago.
According to the newspaper, there are other regions doing the same thing, and the reason is that “in the face of weak private investment and declining exports, officials say they have no choice but to continue borrowing and building to stimulate their economies.”
And the analysis reports that experts expect Beijing to enter an era of “much slower growth,” considering that it “will get worse due to demographics and the widening gap with the United States and its allies, which endangers foreign investment and trade.”
She also noted that “rather than China experiencing just a period of economic weakness, this could last for a long time.”
The newspaper quotes Columbia University history professor, Adam Tose, who specializes in economic crises: “We are witnessing a shift in the most dramatic course in economic history.”
But unlike Japan, China will enter such a period before it reaches “country in the rich world” status, where per capita income is much lower than that of the more advanced economies.
The paper concludes that “China’s economic weakness could undermine public support for Xi,” and some US analysts worry that Beijing “may respond to slowing growth by becoming more repressive at home and more aggressive abroad, raising the risk of conflict, including That is the possibility of conflict over the self-governing island of Taiwan.”
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