Chief among them is the weak performance of the real estate sector, with sales falling to 63% from 2019 levels in April, from 95% in March, according to data from research firm Gavekal.
The housing crisis spilled over into industrial production, which fell in April compared to seasonally adjusted 2019 figures as demand for cement, glass and other raw materials fell. Furthermore, household consumption, one of the main expected drivers of the recovery, is running out of steam.
Home sales, industrial production rates and credit growth rates fell short of previous expectations in April and early May, which could help reduce growth opportunities as expected.
This coincided with rising prices for many materials. Among them are copper and iron, in addition to the decline in equities, and the relative decline of the Chinese yuan against the US dollar in recent months (one dollar is approximately equal to 7 yuan). And at the same time, consumer spending indicators have declined (despite the jump it made at the start of the lifting of Corona restrictions).
According to the latest data released by the National Bureau of Statistics: Factory activity in China contracted faster than expected in May due to weaker demand, increasing pressure on policymakers to support an uneven economic recovery. The official manufacturing PMI fell to 48.8 from 49.2 in April. This is the index’s lowest level in five months and below the 50-point barrier that separates growth from contraction. The PMI missed expectations, rising to 49.4. The services sector grew at the slowest pace in four months in May, with the official non-manufacturing purchasing managers’ index falling to 54.5 from 56.4 in April.
Last month, imports contracted sharply, the producer price index (which measures the cost of goods leaving the factory) fell, property investment slumped, new bank lending plunged, industrial profits fell, and factory output and retail sales beat expectations.
A crisis of confidence
Together, these factors contribute to a “crisis of confidence” in the ability of the Chinese economy to recover more quickly. This was expressed by Goldman Sachs’ chief Chinese economist, Hui Shan, in statements recently quoted by Britain’s Financial Times, when he said: “For consumers, there are concerns about the future, and therefore they don’t want to spend… .. and private investment is also low.” A lot.. and as with entrepreneurs, there is a reluctance to participate. ”
This comes despite attempts by the Chinese government to bolster business confidence to push economic activity forward at a faster pace after three turbulent years.
Faced with many economic challenges, the government has set itself a modest growth target of 5% this year, compared to 3% growth last year (the lowest level in 47 years under the lockdown and a zero COVID policy ).
The ability to recover quickly
Professor of Economics and former Director of the Chinese Research Center in Cairo, Dr. Yasser Jadallah, comments in exclusive statements to “Economy Sky News Arabia”, saying: “China’s economy has the ability to recover quickly, particularly in light of its components, including: It is about diversifying sources of production and markets, and taking advantage of the human element and material resources.
Jadallah agrees with the experts quoted by the British newspaper who confirmed that “the growth target for the full year in China is still achievable, given the low levels recorded last year, when the authorities shut down Shanghai, China’s largest city, and other major cities for months at a time.
Jadallah points out that the Chinese economy has gone through difficult stages and challenges, and has been able to overcome them, in addition to having grown up in difficult circumstances, and has some flexibility to face existing challenges and work in new such circumstances, especially since the existing challenges are linked in one way or another General conditions from which the world economy is suffering under the weight of the consequences and pressures of the Corona pandemic and its repercussions on the conditions economies, as well as the pressures imposed by the war in Ukraine.
Unemployment rate
The expert specializing in Chinese economic affairs also points to what China’s unemployment indicators reflect, which reflect relatively decent job opportunities, and are among the indicators that are boosting confidence in the Chinese economy and its ability to recover. to sort out.
According to Citi, the main unemployment rate fell to 5.2% in April, as job opportunities for migrant workers working in Chinese factories rose 3.1% from pre-corona levels in the first quarter.
As a result, analysts believe that “with the broader labor market strengthening, there is still hope that consumer spending and real estate will find their footing in the months ahead,” according to the Financial Times report. .
In the same context, Jadallah adds, in the same context, other factors supporting Beijing’s ability to recover quickly, including the diversification of external markets (for exports and imports), given that “China has succeeded to invade global markets, and it has great diversity in that context, and if it loses a market, it has different alternatives.
And he underestimates the impact of the US-led trade war on China’s achievement of its growth goals, explaining that the main purpose of the war is to “slow down” the progress of the Chinese economy in a way that threatens the US economy, while economic indicators and the productive capacities that Beijing enjoys say it is more or less capable of achieving its goals.
The economics professor and former director of the Chinese Research Center in Cairo infers this by referring to China’s share of the global economy.
a quarter of global growth
And according to International Monetary Fund estimates last February, “China’s economy is expected to contribute a quarter of global growth this year, although uncertainty around Covid-19 and the real estate sector may slow momentum.”
And last April, official Chinese data showed that China’s economy grew more than expected in the first quarter, rising 4.5% on an annual basis, supported by policymakers’ decision to boost growth after the removal of strict restrictions to combat Covid-19. in December.
On a quarterly basis, data released by the National Bureau of Statistics showed gross domestic product grew 2.2% in the January-March period.
For his part, the director of the Tahrir Center for Studies and Research, specializing in Chinese affairs, Dr. Imad Al-Azraq, underlines in statements exclusive to “Sky News Arabia Economy” that “the Chinese economy is a huge and diverse. economy, and Beijing has enormous capacity and the ability to absorb shocks, enabling it to achieve rapid recovery.
He points out that the Chinese authorities “are acting regularly to contain the impact of crises and to address the challenges faced by a number of sectors, in order to double their economic capacities in the next stage”, citing the measures taken by the government. in the housing and real estate sectors to contain the crisis and gain the confidence of citizens.
He explains that “the Chinese government has taken a number of measures regarding the real estate sector, including providing large facilities for companies and individuals, while providing loans, concessional grants and exemptions to certain companies, in a way that encourages increased demand and sales,” given the particular importance of the real estate and residential sector to China, which has a population of around one and a half billion people.
whirlwind passing
For Chinese policymakers, “the question is, was the recent recession just a ‘whirlwind’ or will the government need to step in with more support?” asked Robin Xing, chief China economist at Morgan. Stanley, in remarks quoted by Reuters. by the Financial Times.
According to Xing, (Chinese) officials will wait to monitor manufacturing activity over the next two months before making further decisions, indicating that stimulus measures could be taken in the form of targeted subsidies for the purchase of vehicles, easing restrictions on buying real estate and financing infrastructure projects.
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