China’s economic dynamics
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The global recovery from the coronavirus pandemic will inevitably slow down. Reopening the economy may often happen in stages, but it can only happen once. The sudden increase in economic activity after the blockade resumed cannot be repeated, and the relaxation of restrictions will not bring the same boost. But the recent weakness of some key data is worrying. Not only does it reflect the more contagious Delta variant and the spread of supply chain concerns, but it also reflects the slowdown in China.
With the help of government stimulus measures, the rapid growth of industrialized China helped the global economy recover from the 2008 financial crisis. The same was true last year, and the country’s strong rebound in industrial production made it one of the few countries to do so. Achieve positive growth in 2020However, there are now signs that the momentum of its recovery is weakening. This is partly due to the re-emergence of long-term concerns about consumer and corporate debt levels and the changing priorities of the ruling Communist Party.
Wednesday, the Caixin Manufacturing Purchasing Managers IndexIt is one of the most closely watched independent indicators to measure the strength of the world’s largest economy in certain aspects. It shows that China’s manufacturing industry is shrinking. This is the first time since April 2020, when most parts of the world were under lockdown in response to a pandemic.
To some extent, the slowdown in economic activity reflects the same factors that hinder recovery elsewhere. The spread of the Delta variant has pushed many regions of China back to lockdown, and the government has re-implemented regional travel restrictions. Supply chain issues also prevent manufacturers from responding to higher orders as quickly as they want. The shortage of semiconductors and containers combined with the Covid-19 epidemic in which Vietnam itself is a manufacturing powerhouse has restricted industrial production.
In the United States, delta has also led to a slowdown in growth, and the increasing number of cases has weakened consumers’ desire to spend. In Europe, supply chain issues have caused inflation to rise.Euro zone price growth rate reached Highest level in ten years According to official data released earlier this week, in July.Part of the reason is “Basic effect“Because the annual data compares with last year’s unusually low prices, manufacturers are also hindered by the same shortages as their Chinese counterparts.
However, in China, people are more worried about debt problems and the country’s long-term real estate boom may end.Evergrande, the most indebted real estate developer in China, warns On the verge of default. Developers across the board are now facing Higher interest cost. Part of the reason is the expected result last year The move of the Communist Party Reduce the economy’s dependence on real estate and restrict the use of debt by real estate developers.
Overall, the Chinese government no longer prioritizes growth as it used to, but is trying to curb unbridled capitalism, whether it is the power of large technology companies or rising economic inequality. This may be understandable- Aluminum production slows down It has been blamed on the government’s determination to reduce pollution-but this will mean that the country will no longer be the engine of global growth after the 2008 financial crisis. This time, the rest of the world will have to find other engines to power the recovery.