Chinese ‘tea leaves’ fail to reveal economic fix
Beijing’s ability to deal with ‘hidden risks’ and shore up confidence is still shrouded in secrecy
To get a true glimpse of the state of China’s economy, forget reading the “official tea leaves.” Data showed earlier this week that signs of deflation have set in with overcapacity forcing down factory-gate prices.
Weak domestic spending has only added to the gloom along with growing concerns about President Xi Jinping’s economic strategy.
The ability of the ruling Communist Party to fix these problems has also been questioned amid sky-high unemployment among the young, a local government debt crisis, and a real estate meltdown.
Even the annual Central Economic Work Conference of senior Party leaders and advisors failed to add clarity while warning of the challenges ahead next year, including “hidden risks.”
“On Tuesday, China concluded [the] conference [with] the official readout [containing the usual] block of political cliches,” James Palmer, of Foreign Policy, wrote in China Brief.
“Ultimately, actual policy implementation will be far more revealing than reading the tea leaves of the official language,” he said.
The risks:
- Local government debt is hovering around US$13 trillion or 76% of economic output.
- Property giants Evergrande and Country Life are teetering on the brink of bankruptcy, owing a combined $500 billion in bad loans.
- Up to 90% of household wealth in China is tied up in property.
- As for unemployment among the young, it might be as high as 46% after officially hitting a record 21.3% in June before Beijing suspended publishing the figures.
The global economy is on the brink of Cold War II.
Delve deeper: China has also angered the United States and the European Union with its predatory trade practices.
Between the lines: International Monetary Fund Deputy Managing Director, Gita Gopinath, has even warned that the global economy is on the brink of Cold War II.
What she said: “If we descend into Cold War II, knowing the costs, we may not see mutually assured economic destruction. But we could see an annihilation of the gains from open trade.”
Big picture: At the heart of China’s economic malaise is the lack of transparency in Party policy-making and Xi’s obsession with national security as a way of controlling the propaganda narrative.
China Factor comment: Three years of geopolitical and economic “disasters” have trashed Xi’s reputation at home and abroad. Not that you would know that from China’s state-run media and the Xicophants in the country’s academia.