China’s zero-Covid policy is shutting down manufacturing, which cuts exports. Their real estate crisis impacts 1/3 of their economy.
https://www.wsj.com/articles/china-economy-recession-covid-l…
**China’s Economy Appears to Be Stalling, Threatening to Drag Down Global Growth**
**While a traditional recession remains unlikely, economists see worrisome signs of a slowdown**
**By Jason Douglas, Stella Yifan Xie and Selina Cheng, The Wall Street Journal, May. 1, 2022**
**...Underlying conditions, worsened by Covid lockdowns in Shanghai and elsewhere, are starting to feel more akin to a recession — something China hasn’t experienced in decades.**
**Millions of new graduates are struggling to find a job. Business confidence has fallen. Imports have plummeted and nervous Chinese are socking away more savings....**
**Any sustained slowdown in China will be felt globally, depriving the world economy of one of its most dependable engines when inflation and war are raising recession fears in the U.S. and Europe this year. The U.S. economy shrank at a 1.4% annual rate in the first quarter, data released last week showed....** [end quote]
More than 10 million college students are due to graduate this year, a record for China, but a gauge of vacancies compiled by the China Institute for Employment Research at Renmin University of China and job search website Zhaopin suggests there aren’t nearly enough jobs for them all. China will have a problem of “excess elites” which historian Peter Turchin shows often cause social problems from disappointed high expectations. Some may migrate to the U.S. or other countries, where they could “bump” local educated employees.
China has never had a real recession since they never had a real capitalist economy. The country has grown like gangbusters for the past 30 years. Plenty of debt. Plenty of newly-educated, ambitious people. Developing high youth unemployment. The number of people employed at small- and medium-size businesses has shrunk by around 30%. Shanghai stock market looks a lot like the U.S. stock market.
https://stockcharts.com/h-sc/ui?s=%24SSEC
A Chinese recession would have widespread impact since they would import fewer raw materials and finished goods. That will reduce growth and exacerbate inflation around the world – stagflation.
If Covid is contained in China, they could re-open Shanghai and Beijing in a relatively short time. But Covid is hard to contain.
Time will tell.
Wendy