Barron's: China's Flagging Economy

Barron’s hadline: China Stocks Are No Longer a Sure Thing. Where to Invest Now.

By Reshma Kapadia
Aug. 19, 2022 2:30 am ET

Though China eked out 0.4% growth in the second quarter—far from the 5.5% annual target it set earlier this year—policy makers haven’t meaningfully softened their stance, in part because their healthcare system is ill-equipped to deal with a major outbreak, their vaccine hasn’t been as effective as other versions, and older Chinese have been slow to get vaccinated. The threat of getting stranded because of a Covid outbreak, as 80,000 tourists did on the island of Hainan this month, or locked in a mall for days, has curtailed economic activity.

China’s crackdown on technology sectors created its own strain, with companies like Alibaba, Tencent, and laying off as much as 15% of their workers, according to Rhodium Group. Roughly one in five 16- to 24-year-olds were out of a job in July, with unemployment nearing 20%.

“The job market is brutal. The start-up scene is not as optimistic as two to three years ago, as funding has stalled. People are taking gig jobs and cutting back on going out,” says Zak Dychtwald, CEO of Young China Group, a research and consulting firm. Dychtwald says the situation is the worst since he started tracking China’s roughly 700 million people under the age of 40 a dozen years ago. That’s reflected in a reduced appetite to borrow money, even as China makes it easier to do so.

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