Last Updated on 03/09/2024 by Arun jain
In 2004, as China’s economy was emerging as a global force, a group of researchers began conducting nationwide surveys to ask Chinese people whether they were better off financially than they had been five years earlier.
The percentage who felt more affluent increased five years later and again in 2014 when the survey reached a high of 77 percent.
Last year, when respondents were asked the same question, that figure dropped to 39 percent.
Results of That surveyTitled “Getting Ahead in Today’s China: From Optimism to Pessimism,” speak to a new reality. China’s economy is facing a crisis not experienced since it opened its economy to the world more than four decades ago. This Rebound after covid What was supposed to revive the economy turned out to be more of a fad.
A few years ago, Beijing vowed to wean its economy off its reliance on the overheated real estate market, a sector that relied on household savings as well as China’s banking sector and local government finances. Now, the property sector is in crisis. The developers collapsedLeaving behind huge debts, a trail Failed investments, Unsold apartments and lost his job.
Chinese consumers, already hardwired to save heavily, have become even more frugal. Businesses bearing the crippling impact of draconian Covid measures have cut salaries and cut back on hiring. There are millions of college graduates joining the job market Facing long odds and poor prospects. And China population It has decreased for two years in a row. In a country where most people knew only to grow the economy faster and improve living conditions, Confidence is waning.
Sherry Yang opened her business making shop signs, billboards and posters in 2006 in southwest China’s Sichuan province. Within a few years, local companies were placing so many orders that Ms. Yang had 16 employees and her printing machines were running around the clock.
But business never fully recovered after Covid, she said. This summer, already sluggish demand worsened; Sales in July were down 70 percent from a year earlier. Ms Yang said it seemed like every industry was struggling and no one was spending.
Ms. Yang has six employees, many of whom spend the day scrolling through their phones because there is not enough work.
“This has been the hardest year since we started,” she said.
Consumer spending, which Chinese authorities have identified as an important driver of growth, remains weak across the economy.
Alibaba, China’s biggest e-commerce company, said sales at its domestic online shopping business fell 1 percent in the spring. China’s summer movie has sold at the box office dropped by almost half than last year, according to entertainment data provider Maoyan. The US Department of Agriculture predicted in August that Chinese consumers Will cut back Economic pressures on buying pork and turning to cheaper beef.
Scores of foreign companies that once flocked to China to catch the rising tide are now being snapped up. Last month, beauty retailer Sephora, an arm of French luxury group LVMH, announced it was cutting jobs due to a “challenging market”. IBM is closing two of its research and development centers in China.
And policymakers trying to respond are stymied because they can’t rely on major fixes that have worked in the past. For years, local governments borrowed money for patchy development projects that kept people working and the construction sector booming — even if there wasn’t much infrastructure actually needed.
But the debt from that debt, often funneled through opaque funding channels, has grown to more than $7 trillion. With investors already worried about China’s financial system, the days of borrowing for vanity infrastructure are unlikely to return anytime soon.
The Chinese government has signaled its alarm by restricting access to data about markets and the economy. Last year, it suspended releasing youth unemployment figures after the numbers hit record highs. It started Distribution of information Again this year, with a new method that reduced the numbers.
To quell talk of a major economic crisis, officials have cautioned some economists against making public comparisons between China’s problems and the collapse of Japan’s debt-fueled property bubble in the 1980s, which weighed on its economy for decades.
However, China’s debt is hard to ignore.
While the collapse of the housing sector has caused massive collateral damage, the risk of bankruptcy has been minimized by China’s tightly controlled financial system. The danger is that the government may have fewer financial resources to deploy to prevent things from unraveling.
“The result of this financial crisis is low growth,” said Alicia García-Herrero, chief economist for the Asia-Pacific region.
Economic uncertainty has left Chinese savers and foreign investors alike scrambling for safe places to park their money. Real estate prices Keep divingAnd Chinese stocks are underperforming Compared to almost every other major country, including the United States, Japan and India.
Foreign funds turned into net sellers of Chinese equities in 2024, the first annual outflow since data became available a decade ago. Shares of nearly 180 Chinese companies have been removed from key stock market indexes since the start of the year, reducing the presence of Chinese companies in global benchmarks.
Investors have retreated to the safety of China’s bond market, driving up prices and driving yields lower. But it also comes with potential risk. Yields fell so sharply that the country’s central bank is now worried that it could leave banks vulnerable if interest rates rise in the future.
There are also Chinese investors A pile of goldHelping to push prices to record highs.
China has predicted that its economy will About 5 percent grow This year, a faster rate than most major economies, though that may now be in doubt. record setting A surge in exportsChina is fueling economic growth by flooding the world with electric vehicles, batteries and home appliances. But the resulting supply glut is also undermining the profitability of high-tech manufacturing industries that China had hoped would soften the blow of its painful shift to real-estate-led growth, while drawing backlash from a growing number of major trading partners. .
For its part, China has played down economic concerns. One in April Opinion article In state media, Jin Ruiting, director of the Institute of International Economics at the Chinese Academy of Macroeconomic Research, said Western media and politicians “continued to make noise about China’s short-term economic fluctuations,” while “unilaterally exaggerating the problems and challenges. The Chinese economy .”
But fundamental problems remain.
There are not enough jobs for a large number of young people. In July, China’s unemployment rate among 16- to 24-year-olds rose above 17 percent, up from 13 percent in June.
Winnie Chen graduated this summer with an auditing degree in the southeastern Chinese city of Nanchang. She took the civil services exam in March but did not get the job, competing against hundreds of applicants for every available position.
She started looking for jobs in the private sector. Ms. Chen messaged 1,229 companies on the job-seeking app and applied for 119 jobs in accounting, e-commerce, social media and other industries. After dozens of interviews, she said, she was offered a few jobs — but they all came with “absurd” conditions.
One job had a starting salary of $380 per month, which she considered too little to live on. Another company offered her a position, but said she would have to work on a public holiday and would not get a day off in return. She was offered a position she called a makeup artist, but turned it down after learning she would actually have to work in a nightclub.
“It seems now that there are so many college graduates, so many people but so few jobs,” Ms. Chen said, adding that many of her classmates were unemployed. “The economy is in bad shape.”
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