Perfect storm swirls around China’s economy
Bubbling beneath the surface is a river of debt that is threatening key sectors and local governments
China’s self-imposed isolation drags on for another year.
Even as Beijing’s zero-Covid policy blocks international travel, virus clusters have continued to spring up across the country, while infections in Hong Kong have spiraled out of control.
Economically, the property sector is in meltdown while the ruling Communist Party has launched another crackdown on Big Tech.
Bubbling beneath the surface is a river of debt that is also threatening to immerse key sectors and local governments.
“China is experiencing a slow-motion economic crisis that could undermine stability in the current regime and have serious negative consequences for the global economy,” Thomas J Duesterberg, of the Hudson Institute, a conservative think tank, said.
“Despite the many warning signs, Western analysts and policymakers are optimistic that [President] Xi Jinping is up to the task of managing the crisis. Such optimism is misplaced,” the author, of Economic Cracks in the Great Wall of China, wrote in a commentary for the Wall Street Journal.
- More than 10 provinces across mainland China have reported Covid-19 infections.
- In the latest wave, four cases were in the capital Beijing and 10 in Wuhan.
- Hong Kong has been put on a “war footing” after reporting 6,211 new cases and 32 deaths on Tuesday.
- On the economic front, investment raised by newly-launched private funds plunged 44% in January compared to the previous month.
- Official data showed evidence of a shrinking appetite for risk amid a slowing economy and rising geopolitical tension.
- The latest government clampdown on Big Tech companies, such as Alibaba, Tencent and Ant, has only added to the gloom.
Delve deeper: Rising concerns about ballooning loans across the property landscape have fueled an atmosphere of anxiety.
What was said: “China’s economy is hitting a great wall,” Robert Z Aliber, the prominent University of Chicago economist, told Fortune magazine at the end of last year.
Big picture: The problems plaguing the property sector are just the tip of a Titanic-like iceberg. Data released by the Bank for International Settlements revealed that overall debt in China has increased 13-fold in the past 15 years. It is now nearly three times the size of the entire economy.
Red lines: “People frequently make claims that China’s authoritarian government and top-down economic direction gives it more focus and purpose than the seemingly chaotic market system of the United States,” Milton Ezrati, an economics and investment strategy consultant, said.
Mortal weakness? “But these aspects of China, as the evidence increasingly makes clear, are not strengths at all. They are in fact huge, perhaps mortal weaknesses,” Ezrati wrote in an essay for Forbes earlier this week.
China Factor comment: Beijing is facing an economic blizzard just as cracks start to appear in its zero-Covid policy.