When China suddenly dismantled its lockdowns and other Covid precautions last December, officials in Beijing and many investors expected the economy to spring back to life.
It has not worked out that way.
Investment in China has stagnated this spring after a flurry of activity in late winter. Exports are shrinking. Fewer and fewer new housing projects are being started. Prices are falling. More than one in five young people is unemployed.
China has tried many fixes over the last few years when its economy had flagged, like heavy borrowing to pay for roads and rail lines. And it spent huge sums on testing and quarantines during the pandemic. Extra stimulus spending now with borrowed money would spur a burst of activity but pose a difficult choice for policymakers already worried about the accumulated debt.
“Authorities risk being behind the curve in stimulating the economy, but there’s no quick fix,” said Louise Loo, an economist specializing in China in the Singapore office of Oxford Economics.
GiediOne on June 20th, 2023 at 02:27 UTC »
Looks like Gordon Chang's prediction has finally come to pass.
Nomustang on June 20th, 2023 at 02:01 UTC »
Too early to say if they'll stagnate. This would need to continue for years to confirm that.
Admirable_Custard608 on June 20th, 2023 at 00:02 UTC »
Investment in China has stagnated this spring after a flurry of activity in late winter. Exports are shrinking. Fewer and fewer new housing projects are being started. Prices are falling. More than one in five young people is unemployed.China has tried many fixes over the last few years when its economy had flagged, like heavy borrowing to pay for roads and rail lines. And it spent huge sums on testing and quarantines during the pandemic. Extra stimulus spending now with borrowed money would spur a burst of activity but pose a difficult choice for policymakers already worried about the accumulated debt.
A pointed analysis of recent datapoints that suggests China is stagnating after the initial post-COVID restrictions bump. As it's been said in this space before, and according to the majority of analysts, China is going through structural changes that make quick fixes impossible.
Shrinking population, risks of stimulating demand via lower interest rates and increased fiscal spending, the aftermath of the real estate bubble bursting are not easy issues to face at once - basically a mix of structural, systemic and cyclical problems.
Nonetheless, evidence appears to indicate the government's willingness to go ahead and open the floodgates: “In response to the changes in the economic situation, more forceful measures must be taken to enhance the momentum of development, optimize the economic structure, and promote the continuous recovery of the economy,” the country’s State Council, or cabinet, said after a meeting on Friday led by Li Qiang, the country’s new premier.
(Question for the general public here: is Li Quiang the former Economic Minister? I remember a Li Kequiang but not sure it's the same guy. He was very capable)
They're also using the exchange rate to weaken the currency and encourage exports... Kinda answers the question as to why the yuan has a hard time acquiring importance as a reserve currency...