China’s central bank cut key lending rates in a surprise move on Monday to revive demand as data showed the economy unexpectedly slowing in July, with factory and retail activity squeezed by Beijing’s zero-COVID policy and a property crisis.
China’s economy narrowly escaped a contraction in the June quarter, hobbled by the lockdown of the commercial hub of Shanghai, a deepening downturn in the property market and persistently soft consumer spending.
The property sector, which has been further rocked by a mortgage boycott that weighed on buyer sentiment, deteriorated in July. Property investment tumbled 12.3% last month, the fastest rate this year, while the drop in new sales deepened to 28.9%.
The wealth of average Chinese citizen is in property not financial assets like stocks or bonds.
With the decline of the property sector I wonder if discontentment is spreading amongst the Chinese citizenry? Political upheaval?
Wharton School look at what’s behind the China’s economic decline. And no it’s not the US-China trade war. “the challenges to China’s economy are deeper, structural, longer term, and have been building for years. They include over-investment, high savings and modest, if growing, consumer spending, high debt and low industrial productivity.”
I was surprise to learn that China’s net export has been shrinking for year and represent less than 1% of China’s total GDP.
China’s economic growth has been on the decline sine 2009. Why?
“(1) demographics, “China is getting older” and the workforce is beginning to shrink; (2) “regression to the mean” – countries that grow quickly “almost always encounter … very rapid deceleration in growth at some point;” and (3) “excessive reliance on capital investment,” particularly in infrastructure.“ I guess them bullet train only contribution so much to the GDP.
“Added to overspending on infrastructure, China also is boosting consumer and industrial spending by expanding available credit, Dasher says. “They are really very debt-ridden.”
I have posted many times in the past about excess China debt.
More at Wharton link:https://knowledge.wharton.upenn.edu/article/chinas-gdp-falli…