First modification:
China is due to announce on Tuesday, in full congress of the Communist Party, one of the weakest quarterly economic growth since 2020, decimated by anticovid restrictions and the crisis in the real estate sector.
Despite these impacts, “no sign of relaxation of the zero covid is in sight,” warns the economist Ting Lu of the Nomura bank, who even notes a tightening. “Loosening” in the face of the virus would be “irresponsible”, the official press repeated throughout the week, shaking hopes of a short-term return to normality.
In recent days, the spike in infections has raised fears of a return to restrictions, especially in Shanghai, China’s economic and financial lung, confined for two months in the spring. At the same time, the country is going through an unprecedented crisis in the real estate sector, the historic engine of China’s growth. The measures adopted by Beijing in 2020 against excessive indebtedness put this industry, which represents a quarter of the country’s wealth, in serious difficulties. After years of dizzying growth, real estate sales are falling in big cities and many developers are fighting for their survival while some owners refuse to pay their mortgages for unfinished apartments.
– “Modern economy” –
In spite of everything, “many indicators straightened out relatively well” after the lockdowns of the boreal spring that were a great blow to activity, clarifies the analyst Thomas Gatley, of the Gavekal Dragonomics cabinet, specialized in the Chinese economy. Private vehicle sales in China remained strong in September, buoyed by demand for clean cars.
Exports in August grew by 7.1% in one year and China launched investments in infrastructure to sustain activity. But even so, “these pillars of growth are weakening,” says Gatley. And “the Chinese economy faces more fundamental problems” of transformation, says Jean-Louis Rocca, a sinologist at the Institute of Political Sciences in Paris. After decades of growth fueled by investment and exports, China “does not want to be the world’s workshop anymore” but aspires to a “modern economy” with higher added value focused on high technologies and consumption.
The problem is that this new economy “has trouble replacing the old one” and “above all, it doesn’t create much employment,” the researcher told AFP. “Will it be able to continue to employ the entire middle class, preserving its heritage?” he asks. These are crucial issues for the Communist Party, which mainly bases its legitimacy on increasing the purchasing power of the population.
with AFP
