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With the most recent quarterly reports showing weak economic growth in China, world market investors and financial experts point out that the world’s second largest economy will not achieve its modest target of 5% GDP by the end of this year. These are the reasons for the bleak economic outlook for the Asian giant.
The same Chinese prime minister, Li Qiang, sees it as difficult for the country to achieve the economic growth that the country set for itself at 5% by the end of 2023, a modest growth from the 3% with which it closed in 2022, one of its worst performances. in decades.
And it is that in addition to the threats of a global recession, Beijing has its own internal problems that have been dragging its economy since pre-pandemic times.
World markets criticize China for weak domestic demand. SOnly in June, retail sales, a key indicator to see how national consumption is, were below expectations, increasing 3.1% year-on-year.
To these problems of national consumption is added a drop in foreign demandin part because many countries found other suppliers for a variety of products while China increasingly closed its doors under the strict ‘zero Covid’ policy.
In second place, the persistent crisis in the real estate sector. Since 2021, many companies in the sector began to report liquidity problems due to obstacles they encountered in financing programs with the State.
The scarcity of resources to be able to develop in optimal conditions generated distrust in potential buyers and this resulted in a slowdown in the market. Some time later, housing prices fell to critical levels and complicated the scenario for one of the main sources of investment for Chinese families.
In reports with a cut-off for the first half of 2023, delivered by the Chinese Government, there was a 5.3% decrease in commercial sales of commercial properties by land area, an indicator that had already plummeted 24.3% in 2022.
The confidence of the private sector It is another of the challenges that Beijing has, since the harsh laws around Covid-19 during the pandemic generated an environment of mistrust among merchants, who doubt whether or not to increase investment in their companies.
“Businesses are hesitant to increase production or investment in the face of economic setbacks. (…) Now, many of them are taking a wait and see attitude, and will not try to expand their operations until there is a rebound in general demand “, explained to EFE Agency Harry Murphy Cruise, economist at Moody’s Analytics.
Regarding the cost of living, in China lives a risk of deflationa scenario contrary to inflation that supposes a widespread and prolonged fall in prices, partly caused by an excess supply in the markets.
In June, China experienced its ninth consecutive month of contraction, falling 5.4% year-on-year and, while inflation in many countries tends to rise, in the same month the change in consumer prices in China froze at 0% year-on-year. , its lowest rate in 28 months.
to finish understanding why China’s economic recovery is slowing down, economic experts They consider that there are insufficient stimuli to encourage the Chinese market, such as what is allocated to infrastructure, fiscal support for the real estate sector or decisions regarding monetary policy and interest rates.
“There is a desperate need for more. We expect to see looser monetary policy in the coming months and targeted fiscal support measures for key sectors such as real estate and construction,” Murphy said.
With EFE and Reuters
