According to a report, the Chinese economy is losing steam.
Central bank officials are already reeling from the aftermath of the COVID-19 epidemic, inflation, and increasing international political instability, so the likelihood of a lengthy depression for the world’s second-biggest economy presents a significant danger to global growth. Long-term consequences touch everything from financial markets to global supply lines, even if the near-term effect on the U.S. economy is minor.
The scale of the issues confronting China was apparent after months of President Xi Jinping dismantling inhumane lockdown rules meant to curb Covid-19’s spread. While the end of “zero Covid” raised optimism, problems in the real estate market became apparent. Rising corporate defaults, rising unemployment, and falling consumer prices exacerbated concerns that the pandemic could quickly propagate internationally.
According to the report, new tax benefits and rate cuts meant to encourage demand were discussed during IMF Managing Director Kristalina Georgieva’s meetings with Chinese authorities recently.
The director of Capital Economics’ China division, Julian Evans-Pritchard, believes that the consequence may not be noticed for some time. Any economic gain is likely to be minuscule due to structural dips.
Harvard professor and past IMF chief economist Kenneth Rogoff, who has for years warned of the dangers presented by China’s ballooning debt, believes a financial catastrophe may not happen. However, there will be suffering in developing nations that depend on China’s products for their exports and imports.
A report reveals that important economic metrics, including house sales, industrial earnings, and exports, have all dropped by double digits in recent months. China’s consumer prices decreased in July, although they soared everywhere else, fueling worries that deflation may exacerbate the problems already facing China’s highly indebted businesses.
Nearly 30 percent of China’s GDP is generated by the construction industry, which is presently threatened by a confluence of unique variables.
According to reports, China Evergrande filed for Chapter 11 protection. Amid already high levels of uncertainty and panic, the imminent failure of another prominent property developer, Country Garden, due to missing bond payments this month has just added fuel to the fire.