China’s post-pandemic economy is faltering, and Beijing is trying to hide its failures from its citizens, as seen in a speech by a senior banking official.
Last week, the governor of the People’s Bank of China, Pan Gongsheng, warned Hong Kong bankers that Beijing’s economy was embarking on a “long and difficult journey” on the road to transformation.
However, when the speech was taken to a local audience, the phrase “long and difficult” was deleted.
The letter to the Chinese public also provided little information about what the transformation might look like, but was aimed at “high quality and sustainable growth.”
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China’s share in the global economy is declining, which experts have determined will begin to diminish in 2022, after a series of strict measures related to the Corona virus.
Other major factors in China’s slowing economic strength include a declining real estate sector, local government debt risks, slowing global growth, and geopolitical tensions.
Gong Sheng’s comments come ahead of the Central Economic Work Conference expected to be held later this month.
Analysts and investors are trying to figure out the Communist Party’s targets for GDP growth in 2024, which in turn will determine support levels for the economy.
“I think the market is anticipating signs of further support measures,” said Fred Newman, chief Asia economist at HSBC.
“Will there be more fiscal stimulus in the future? What is the thinking around monetary easing? Because there is a feeling that without more political support, the economy will struggle to reach 5 per cent next year organically.”
Investor Ruchir Sharma said the country’s decades-long period of growth has come to an end, with its share of global GDP expected to shrink by 1.4 percent over two years.
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The speech the People’s Bank of China gave to bankers in Hong Kong was different from the speech it conveyed to the local audience
Reuters
In October, China unveiled a plan to issue 1 trillion yuan ($139.84 billion) worth of sovereign bonds by the end of the year, raising the 2023 budget deficit target to 3.8 percent of GDP from the original 3 percent.
The People’s Bank of China has also implemented modest interest rate cuts and pumped more money into the economy in recent months, pledging continued policy support.
“Going forward, the People’s Bank of China will continue to maintain its accommodative monetary policy to provide support to the economy,” Pan said.
Pan said it will be very important for China to seek high-quality and sustainable growth.
“The traditional model of relying heavily on infrastructure and real estate may generate higher growth, but it may also delay structural adjustment and undermine the sustainability of growth,” he said.
“The ongoing economic transformation will be a long and difficult journey, but it is a journey we must take.”
Various reports said that regulators are considering a “white list” of developers eligible for bank loans, debt and equity financing.
Economists believe that the new measures, as well as those announced by the government, are aimed at boosting the faltering economy.
However, earlier today, credit rating agency Moody’s lowered its credit outlook for China to negative.
China’s share in the global economy is declining
Reuters
The rating agency said Beijing may need to bail out local governments as the real estate sector continues to collapse.
China’s Ministry of Finance said it was “disappointed” by Moody’s decision, and described the agency’s concerns as “unnecessary.”
Elsewhere, eight million homeowners in China defaulted on mortgages and loans, a record number since the outbreak of the coronavirus pandemic.
According to local courts, a total of 8.54 million people, mostly between the ages of 18 and 59, have been officially blacklisted by authorities.
This is a result of missed payments on everything from mortgages to business loans.
This figure, equivalent to about 1% of working-age Chinese adults, is up from 5.7 million defaulters in early 2020.
This comes on the heels of pandemic lockdowns and other restrictions that have hampered economic growth and devastated household income.
The rise in defaults highlights the country’s lack of personal bankruptcy laws that might mitigate the financial and social impact of high debt.
It also makes it more difficult to boost consumer confidence in the world’s second-largest economy and an important source of global demand.
Under Chinese law, defaulters are banned from a range of economic activities, including purchasing airline tickets and making payments through mobile applications such as Alipay and WeChat Pay.