An economic typhoon is barreling into China’s economy.
Nearly every sector in the country has been buffeted by President Xi Jinping’s “zero-Covid” policy, a “meltdown” in the world’s largest property market and shrinking consumer demand.
Rising unemployment and local government debt bubbles have only added to an economy in crisis along with geopolitical tension between Beijing and Washington.
At the heart of the problem is Comrade Xi.
“Lost amid the hype about China’s ascent is just how poorly the country has performed under Xi’s stewardship in nearly every aspect of policy [during his decade in power]. The economy has slowed dramatically,” Michael Schuman, of the Atlantic Council’s Global China Hub, wrote in a commentary for The Atlantic.
- The World Bank has predicted that China’s economic output will lag behind the rest of Asia for the first time since 1990.
- It has revised its GDP growth forecast to 2.8%, compared with 8.1% last year.
- Xi’s “zero-Covid” policy, which has resulted in a never-ending round of lockdowns across China, has severely damaged economic activity.
- In turn, this has hit consumer confidence at a time when Beijing is grappling with a property sector engulfed in a mountain of debt.
What was said: “China, which was leading the recovery from the pandemic and largely shrugged off the Delta [Covid variant] difficulties, is now paying the economic cost of containing the disease in its most infectious manifestation,” Aaditya Mattoo, the World Bank’s chief economist for East Asia and the Pacific, told the Financial Times.
Between the lines: As the perfect storm gathers pace, the World Bank has highlighted “structural” concerns in the property market. Already the aftershocks are being felt amid a rise in unemployment and shrinking consumer spending.
Warning shot: “China’s real retail sales are a staggering 17% below pre-Covid trends. Unless we see a strong and sustained recovery the day zero-Covid ends, China won’t go back to being a high-growth country that can catch up to developed economies,” Sergi Lanau, the deputy chief economist at the Institute of International Finance, tweeted.
China Factor comment: Xi’s obsession with being the “President of Everything” has triggered an economic slump. It has also left China a political outcast on the world stage with its bullying of Taiwan and its military posturing in the South China Sea.