Is “China” really a “time bomb”?

Chronic traction in The "real estate sector" has increased pressure on public debt. Youth unemployment rates are rising. Less demand for foreign investment These remain major obstacles to supporting sustainable economic recovery.

It appears that China's economy will face even more challenges. In the middle of last August China's National Bureau of Statistics released data showing that the retail sales index Industrial output and investment grew at a slower rate than expected, indicating that the engines of business and consumption in China is insufficient. These data reinforce that The Chinese economy faces intensifying pressure. As a result, the central bank had to reduce the policy interest rate and other interest rates immediately to support activities. and stimulate economic recovery

Analysts think that Lower credit growth rates and increased deflation risks during July This makes it necessary to use more accommodative financial measures to stop the economic slowdown. Meanwhile, the risk of default by real estate developers building housing and missed payments by private wealth management managers also have an impact. “Financial market confidence” as well, using “Japan” as an example in the 90s, companies paid down debt to give them a chance to survive. But in China today Companies and households are cutting back on borrowing. Due to lack of confidence and trust

Real estate sector drags down China's economy

Chronic traction in The "real estate sector" has increased pressure on public debt. Youth unemployment rates are rising. Less demand for foreign investment These remain major obstacles to supporting sustainable economic recovery. Moreover, the crisis in the real estate sector has raised concerns about the risk of continued impacts on the financial system that may destabilize an already weak economy.

“Country Garden,” a large Chinese real estate developer, announced the suspension of sales of at least 10 domestic bonds and missed interest payments on US dollar bonds. These events have led analysts to believe with deep concern that Rising tensions will trickle down to developers of good quality investor-owned properties, most of which are state-owned.

In 2563, China began cracking down on real estate developers that relied heavily on debt to grow. The authorities later relaxed their stance a few months ago. But no large-scale stimulus measures were taken. Analysts say that the more China's government tries to help the real estate sector, the longer it will take for the industry to find its footing.

China is a “time bomb”, is there any basis or provocation??

From the weak growth data above Recently, President Joe Biden of the United States expressed his opinion about China that It is becoming like a "time bomb" based on internal economic and social tensions that may have an impact on the world. And another issue that the United States is concerned about is How China offers high interest rates on infrastructure loans and then seizes those assets when the borrowing country Default on payment of debt

However, from the Chinese side, Such comments from the US leader provocative Chinese media responded that this was not the first time that US politicians Said that China's economy would collapse, which in the end had to swallow itself. He said harsh criticism of China had become an important component of the US pre-election campaign. And it has become a competition to see who can say the most ridiculous things about China to capture the public's attention.

Considering the reality Currently, various countries are facing different challenges to recover from the COVID-19 crisis. And China is in the same situation. However, China views that its economy has the ability to recover to normal and is doing well. This is despite the fact that China must overcome many difficulties, such as creating jobs for young people and increasing domestic demand. These things do not make China a “time bomb” in any way.

On the other hand, turning to the US economy, Fitch Ratings, the world's leading credit rating agency, recently downgraded the US credit rating from AAA to AA+, citing standards of governance. which has continuously worsened over the past 20 years in terms of the budget and debt. Therefore, it can be seen that the United States has a chronic problem. Not just temporarily In addition, the United States It also supports the system of unity and protectionism in trade with other countries. all over the world, which has a huge impact on industries and global supply chains. and causing damage to the growth of the world economy

If the Chinese economy slows down, what will the impact be?

Another issue that the world is watching is The Chinese economy may be at risk of facing “Lost Decade” with the economic slowdown It's like Japan in the 90s when the real estate sector faced a bursting bubble.

Excessive housing supply But falling consumer demand has led to concerns of a long-term downturn for the real estate sector. Problems with demand structure such as population decline An aging population also poses additional challenges. For example, China's total population is expected to shrink by around 1% over the next 10 years, while the population aged 65 and over is expected to grow by around 44%. XNUMX% These factors indicate that long-term demand for housing and real estate remains restrained and that the real estate sector may face a longer downturn.

The situation in China today is different from Japan in the 90s due to China's economic downturn and various debt problems. It is not yet at the level of Japan's economic crisis 30 years ago. However, in the long term, China is unlikely to return to the 7-8% growth it had before the epidemic. But there are opportunities for sustainable growth that are not being led by the construction boom.

Even though I'm relieved that China's problems will not be like Japan's. But a slowing Chinese economy will lead to slower growth for the global economy. and the impact on each country Each business is diverse. On the downside, the growth of B2B businesses and declining private consumption will have an impact on exporters to China and domestic retailers, where China is one of the group's largest consumers. machinery Hi-tech and luxury products Moreover, slower growth in China will have a negative impact on commodity exporters. especially Latin America and Australia

As the rising cost of imported goods is one of the causes of high inflation, lower prices of Chinese-made goods can help alleviate price pressures. In addition, economic growth slows. China's products can benefit "Europe" by reducing global energy competition. especially Natural gas markets in which countries Europe is easily hit by soaring natural gas prices. And lower prices can help reduce pressure on energy prices.

On the other hand, there are fears that falling prices of Chinese products will increase competition and hurt foreign companies. But it is likely not to bring much change to the global competitive landscape in the medium term. Because if you can feel the various effects It is necessary to undergo a longer period of deflation and currency depreciation.