China is experiencing serious economic issues

Hong Kong: The Chinese economy is in dire straits and may remain so for some time. The housing market is crumbling, youth unemployment has reached a record level, growth has stagnated, and businesses are dealing with ongoing supply chain issues.

The second-largest economy in the world is struggling to cope with the effects of a severe drought, and its enormous real estate market is experiencing negative effects from taking on too much debt.

Beijing’s stringent zero-Covid policy, however, is making the situation significantly worse, and there is no indication that this will change this year, according to CNN.

Eight megacities have experienced complete or partial lockdowns during the past two weeks. Together, these important manufacturing and transportation hubs are home to 127 million people.

According to CNN calculations based on government records, since late August at least 74 cities across the country have been cut off, affecting more than 313 million citizens. Last week, Goldman Sachs estimated that 35% of China’s GDP is produced in cities where lockdowns have occurred (GDP).

The most recent limitations highlight China’s unwavering commitment to eradicating the virus with the toughest controls, notwithstanding the harm.

Maintaining that legitimacy is more crucial than ever for Chinese leader Xi Jinping as he aims to be elected for an unprecedented third term when the Communist Party convenes for its most significant congress in a decade next month, according to CNN.

In the upcoming months, the economy will continue to deteriorate, according to Raymond Yeung, chief Greater China economist for ANZ Research. As the party convention draws near, local governments will “be more inclined to emphasising zero-Covid and snuffing out the viral epidemics,” he continued.

According to CNN, tighter COVID limits may hurt investment and spending during China’s “Golden September, Silver October,” which is often the busiest time for property purchases.

A dramatic downturn in the global economy, meanwhile, is not good news for China’s growth, according to Yeung, as it would have an adverse effect on its exports due to waning demand from the US and European markets.

He now projects that the Chinese economy will expand by just 3% this year, far short of Beijing’s stated goal of 5.5%. More pessimistic analysts are available. This week, Nomura reduced their projection to 2.7%.

According to recent data, the Chinese economy may have another disappointing third quarter. GDP growth slowed significantly from growth of 4.8% in the first quarter to only 0.4% in the second quarter compared to a year earlier.

According to assessments from the public and private sectors issued last week, China’s manufacturing sector contracted in August for the first time in three months, while the expansion of the services sector slowed, according to CNN.

In recent months, the employment situation in China has gotten worse. According to most latest data, the unemployment rate for people aged 16 to 24 reached an all-time high of 19. % in July, setting records for the fourth straight month.

A total of 21 million young people without jobs live in cities and towns in China today. According to CNN, rural unemployment is not counted in government statistics.

Another significant impediment is the deteriorating real estate market. The sector, which contributes up to 30% of China’s GDP, has been severely hampered since 2020 by a government initiative to control risky borrowing and reduce speculative trading. Both the price of real estate and the sales of new residences have been declining.

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