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China’s economic recovery could face a bigger and more difficult battle than Beijing wants the world to believe, thanks to pressure within the real estate sector and “frustration” in the banking industry.
“China’s economy has been slowing for quite some time,” Craig Singleton, a fellow of the Foundation for Defense of Democracies, a nonpartisan, told Fox News Digital. “What we are witnessing right now is a rapid economic slowdown.”
Economists do not seem to be able to lead China’s current economic situation. GDP data showed a sharp slowdown in the second quarter, but just a few weeks ago, some analysts welcomed it as a sign of recovery, and the Hang Seng Index hit a three-month high.
Laliefoo, Chief Chinese Economist at Macquarie in Australia, told Fortune that the economy is “recovering but still very weak.” He said the struggle was due to the effects of a long-term blockade during the pandemic, and China’s zero-corona policy only complicates the matter.
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The policy requires a local blockade with the detection of COVID-19 infection, which has led to a long-term blockade of major ports and economic centers. Shanghai was closed for 60 days in the spring of 2022, with a daily peak of 26,000 in April. After the blockade, authorities reported only 29 cases on June 1.
Singleton argues that while COVID was involved in the first issue, China’s slow recovery is due to “more serious structural and systematic problems.”
“One of them … according to some conservative estimates … is China’s super-leveraged real estate market,” he explained. “China’s real estate sector accounts for 30% of China’s GDP, so even the slightest deviation in its market could have a significant impact on China’s broader global gross domestic product and its broader growth. there is.”
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“Some of China’s largest real estate construction companies have seen a number of very large defaults,” Singleton said. “There is growing dissatisfaction with the Chinese people who have sunk their savings in the Chinese real estate market, primarily as a means of investment or a safe investment, and many are now unable to move home.”
The Bank of China Insurance Regulatory Commission (CBIRC) argued that banks should meet the needs of “reasonable” developer lending, and “all difficulties and problems will be properly resolved,” Reuters reported. .. Data in the real estate sector showed a 7% reduction in the second quarter compared to the previous year.
China’s Prime Minister Li Keqiang has talked with 100,000 officials and has planned 33 points, including a $ 120 billion credit line for infrastructure projects. The World Bank expressed concern Beijing will look to “an old guide to boosting growth through debt-financed infrastructure and real estate investment.”
“Such a growth model is ultimately unsustainable, and the debt of many businesses and local governments is already too high,” the World Bank wrote instead in favor of consumer-based incentives.
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According to Gordon Chan, an Asian expert and senior researcher at the Gatestone Institute, its economic weakness is when China’s President Xi Jinping is seeking another record third-term leader. Is creating a troublesome situation. Xi may try to shake things to show that China remains strong internationally, despite facing these domestic problems.
“Xi Jinping has all the incentives around the world to cause some military misery abroad,” said Chang, who “may invade neighbors or endanger planes and ships.” There is. ”
“I don’t know exactly what he will do, but he has a reason to do it,” Chan added. “Currently, China is in need. [Xi]Received a mortgage boycott. It is currently in 86 cities. Boycott of new supplier. Bank run-This is unprecedented. ”
Mr Chan suggested that China may try to cause trouble with its neighbor, India, which has clashed many times over the last few years. He also pointed out China’s recent invasion of Japan’s waters and new pressure in the South China Sea, which prompted a warning from the US State Department.
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“We know that these are not only boiling events, but some of them can actually ensure a full-blown crisis,” he said.
The Center for Strategic and International Studies writes that the Zero-COVID policy “accurately achieved high economic, social and political costs in a very short period of time.” Center analyst We believe this policy “has disrupted manufacturing, supply chains and consumer spending.”
Singleton said this led to record-high urban youth unemployment and “widespread” frustration in the banking sector. About one-fifth of China’s 16-24 year olds are currently unemployed, which means that less than 15% of recent graduates managed to find a job.
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“There are all signs that China is far short of achieving its 5.5% annual economic growth target,” Singleton claimed. “We are beginning to notice very quickly, as you know, the era of rapid economic growth in China is long ago.”