China’s economic development is currently decreasing, but the country’s internal problems have long been unaddressed.
China’s third-quarter economic growth was 4.9 percent, and analysts predict that future growth would be considerably worse, with some even predicting that GDP growth in the fourth quarter will fall 4 percent or less.
China’s economic growth rate “has not bottomed out,” according to ANZ Bank, which expects the momentum to continue to fall to 3.6 percent in the fourth quarter and forecasts a growth rate of 3.6 percent. The annual rate will fall from 8.3 percent to 8%.
UBS bank economists have reduced their China Annual Economic Growth projection from 8.2 percent to 7.6 percent, implying that the Q4 GDP growth rate will continue to slow. In comparison to the same period last year, the increase was 2.7 percent.
According to the “Wall Street Journal” on October 18. The three pillars of support for China’s economy have begun to slow down. The key drivers of China’s economic development, genuine estate investment, consumption, and exports, could add to the adverse risks in mid-2022 if relaxing policies are not implemented.
On the other hand, China’s economy is not only facing short-term difficulties but is also experiencing a long-term economic decline. According to a BBC study, annual GDP growth in China continued to drop from 2010 through 2019 before falling to where it is currently.
But why aren’t more people aware of the impending crisis? Because the real estate boom has obscured China’s primary economic issues.
According to Nobel Laureate in Economics Paul Krugman, China’s extraordinary rapid growth can be attributed to the utilization of technology from more developed countries and the large-scale migration from the countryside to the city’s town. With the advancement of science and technology and the diminution of the rural labor supply, economic growth will inevitably halt. Furthermore, the one-child policy has reduced the population, with the working-age population having peaked many years ago.
According to Krugman, Slowing growth and shifting demographics do not necessarily indicate the onset of a crisis. Still, the problem is that China’s consumption pattern has not been modified to meet growth needs. The economy is slowing down.
The CCP officials not only failed to fix the economy’s fundamental problems, but they also covered them up by inflating the real estate market. China’s real estate investment has now surpassed that of the United States during the top of the real estate bubble in 2000, whether measured in U.S. dollars or as a percentage of GDP.
According to economist Ren Zeping’s newest piece, real estate investment would account for 51.5 percent of total fixed-asset investment in 2020, with real estate development investment accounting for 27.3 percent of total fixed-asset investment.
Furthermore, the real estate industry has created a significant number of jobs. If the upstream and downstream sectors are included, the number of real estate practitioners is expected to exceed 15 million this year. The advertising effect will be significantly more significant when promoting real estate.
Since the trade war between China and the United States began in 2018, Chinese policymakers have become increasingly aware of the need to boost internal demand, particularly consumption, while reducing reliance on other countries.
According to the Wall Street Journal, the epidemic has pushed China in the opposite direction, with exports becoming the country’s most significant growth engine in years.
China’s trade surplus with the rest of the world hit a multi-year high of 535 billion dollars in 2020, and its surplus with the United States climbed by 7% year on year to 317 U.S. billion dollars.
This demonstrates that the economic imbalance that the CCP is attempting to correct is worsening, perhaps resulting in trade conflicts.
In addition, Jim Chanos noted that the Beijing government has attempted to slow down the real estate market for the fourth time since 2009, but the economy has rapidly halted each time. Beijing was panicked by the stagnation, so it swiftly shifted from brake to accelerate.
There are now indications that the CCP should be more liberal on real estate. Mortgage lending has risen rapidly, mortgage lending rates have fallen, and the credit situation for real estate companies is projected to improve to some extent. The Chinese Central Bank also recently indicated that real estate financing would be distributed consistently and orderly.
Furthermore, the CCP’s climate promises are unlikely to be fulfilled. Mr. Xi did not attend the United Nations Climate Summit. Still, the CCP produced a white paper on “China’s policies and efforts to combat climate change” on October 27 and submitted a report to the UN to confirm the “Dual Carbon Targets” promises.
The CCP’s assurances, on the other hand, are meaningless. In terms of the current circumstances, Deputy Prime Minister Han Zheng conducted an online meeting in Beijing at the end of August to urge provincial officials to “resolutely curb” the expansion of high-emission projects like coal power.
In a closed-door meeting a month later, Han Zheng instructed state-owned energy businesses to take all means to increase coal supply in the face of coal shortages and extensive power disruptions. The CCP’s stated low-carbon compliance also clashes with economic growth ambitions in the long run.
To put it another way, whether it’s real estate regulation, an internal circular economic model, or even climate promises, the CCP’s economic transformation efforts have been fruitless thus far.