For two decades (or more), China’s factory-driven economy awed the world as it expanded at more than 10% per year. But the country has missed double-digit growth over the past decade. The GDP shrank from April to June this year compared with the previous three months.
The drop happened because lockdowns to stop COVID-19 infections hurt factory work and export shipments. Those setbacks also added to financial hardships among China’s top property firms.
China’s $18 trillion economy, the world’s second largest after the United States, shrunk 2.6% from April to June compared to the first three months of the year. China’s economy grew close to 10% per year from 2003 to 2010, World Bank data show. Annual growth gradually slowed through 2019 before dipping to 2.2% in the first pandemic year, 2020, and rebounding to 8.1% last year.
Source:https://chinafund.com/china-and-malaysia-trade/
The lockdown-weary country recorded more than 6% unemployment in April, compared with nearly 5% (4.8%) at the end of 2021. Younger workers and smaller firms have been hit especially hard, analysts say. Chinese consumers are now spending less than normal. Retail sales grew at a low of 3% in June, even as lockdowns eased.
Last year, the economy was already faltering due to problems in real estate and tech. A number of big name Chinese property developers began to default on billions of dollars’ worth of loans last year. Homeowners who bought units through a “pre-pay model” are now refusing to pay mortgages on unfinished homes.
In tech, Chinese regulators began in cracking down on the country’s most powerful firms in late 2020, including e-commerce giant Alibaba Group and social media juggernaut Tencent. Regulators have cited concerns about monopolistic activity and data security.
China’s economic malaise is worrying world markets because the “slope” of recovery is less steep than it was when COVID-19 hit in 2020. Missed mortgage payments threaten the value of assets, including property. Disruptions to export shipping and manufacturing in China have hobbled supply chains in much of the world, in turn adding to inflation and fears of recession.
Officials in Beijing are nudging the economy forward again by spending on infrastructure. The GDP is already showing signs of recovery. Demand for cement and cars, including electric ones, is up. Officials are also relaxing last year’s tough stance on the tech industry.
Any future lockdowns will probably target neighbourhoods rather than all of Shenzhen or Shanghai as the government did earlier this year. However, China’s goal of 5.5% economic growth this year is “very ambitious.”
The government-run China Daily posted an investment bank editorial last week calling for 5.3% economic growth year on year from July through September, and 5.9% in the final months of 2022.
The impact for Malaysia is considerable from both the trade and exchange rate perspective. Our trade with China was USD176.8 billion (RM765.6 billion) last year and the ringgit follows in tandem with the yuan. Hopefully, China recovers for us to have a reasonable year (2022).
References:
What next for China’s economy? Ralph Jennings, VOA, 27 July 2022
China remains Malaysia’s largest trading partner, says envoy, Adrian David, NST, 19 June 2022
No comments:
Post a Comment