China’s economic reports for July paint a bleak picture of an economy in free fall, with nearly all growth and even stability falling short of expectations.
On Sunday, Bloomberg News senior editor Richard Frost compiled the numbers into an indigestible pile:
Surprising July data from China as the economy grapples with Covid Zero, weak demand and a drop in the housing market. year:
Retail sales 2.7%; estimated 4.9%
Industrial production 3.8%, estimated 4.3%
Home sales -28.6%
Real estate investment -12.3%
Steel production -6.4%Youth unemployment rose to 19.9%
— Richard Frost (@frostyhk) 15 August 2022
The latest numbers are based on reports Since August, China’s retail sector has signaled a sharp decline, rising unemployment and falling industrial productivity. First of all, the guillotine blade of China’s volatile real estate market is swinging, on the one hand, the imminent bankruptcy of major real estate companies and the audacious “mortgage issue” On the other hand, individual homeowners.
Bloomberg Analysts aforementioned On Monday, he said China’s chronic coronavirus lockdown is still a big reason for the slowdown:
The country’s commitment to Covid Zero is pushing hard-won economic growth as the repeated threat of lockdown and reopening continues. While the number of cases was low in Shanghai and nearby provinces last month, the number of cases increased in places such as eastern Anhui, Xi’an, home of the famous Terracotta Warriors, and the manufacturing center of Wuxi.
In August, there was also an alleged increase in cases in the resort town of Hainan, where authorities detained holidaymakers, suspended flights and closed businesses to prevent the spread of infection.
SANYA, CHINA – AUGUST 11: Tourists arriving at Sanya Phoenix International Airport on August 11, 2022 in Sanya, Hainan Province, China. As of 04:00 on Thursday, 2,156 tourists stranded due to the recent COVID-19 outbreak in Sanya had returned home. (Photo by VCG/VCG via Getty Images)
These are all very troubling developments for dictator Xi Jinping, who will try to secure an unprecedented third term at the Communist Party Congress this fall.
Xi is clearly reluctant to accept Covid Zero and its continued quarantine practices and touts China as the world’s most effective fighter against the disease it has unleashed. The economic damage from Covid Zero looks bigger than he had hoped and could be enough to please his political opponents. Few analysts have so far found Xi’s position dangerous enough. threatening He may run for a third term, but the party convention may be stranger than he thought.
The Chinese government has so far refrained from implementing major stimulus plans, but the central bank surprised observers on Monday. cutting two key interest rates and the withdrawal of some funds from the banking system, apparently to stimulate loan demand and lessen the impact of the “mortgage revolt”.
As for real estate, China’s largest real estate giant Evergrande is under investigation. initiated Hong Kong Financial Reporting Council (FRC) on Monday.
The FRC said it had “questions about the classification of limited bank deposits and other loans, the evaluation of collateral guarantees provided, and the disclosure of related party transactions in accounts” and additional questions about previous testing performed on all of the above. .
He predicted the investigation would “bring more attention to Evergrande, the world’s most indebted real estate developer, after it failed to meet its self-imposed deadline to restructure its $300 billion in debt by the end of July.”
“In July, Evergrande replaced its CEO and financial officer after an internal investigation found that they had allowed creditors to provide collateral on $2 billion in deposits held by its real estate division. This amount was later confiscated by the banks when the division went into default, and most of the subsidiary’s net cash was wiped out. he remembered.
SANYA, CHINA – AUGUST 12: A traffic policeman stands guard on an empty street as he enforces a constant city-wide check to prevent a new COVID-19 outbreak on August 12, 2022 in Sanya, Hainan Province, China. (Photo by Wu Wei/VCG via Getty Images)
(WSJ) suggested Tuesday that “the typical Chinese stimulus formula is less profitable than in the past” and Beijing’s central planners were unsure of what to do next.
“The burden of economic stimulus in China has traditionally fallen primarily on local governments, which have found themselves in a more difficult financial situation this year as land sales have dried up and tax revenues have fallen. [Chinese coronavirus] failures etc. aforementioned.
Increasing debt to finance large infrastructure projects is unlikely to work right now, as infrastructure has reached the point of declining returns and the threat of further coronavirus lockdowns will make it harder for new projects to be completed.
In addition, Xi has urged China to reduce its debt, so it will likely be reluctant to implement debt-based stimulus strategies. He thought that the Chinese government would remain largely paralyzed until the Communist Party Congress ended and Xi secured his third term.
On Monday they noticed an unusual indication of China’s economic distress: as jobs in the private sector dwindle, young people are starting to dress in boring “civil service chic” or “squad style”, so bureaucracy seems like the best bet. stable career.
“While private companies are announcing mass layoffs due to the pandemic, the popularity of the hiring style reflects the desire to live within a system with stable jobs and incomes,” said Harry Wang, an enthusiastic young bureaucrat.
He noted that millions of applicants competed for several thousand bureaucratic vacancies, with 20,000 applying for a post office in Tibet. Fans of the frame style position themselves as smart wedding favorites among young women, even though their wardrobe choices may seem like dead wallets in their 40s.
Source: Breitbart
