In China, the economy is slowing down

Has the zero Covid policy killed Chinese growth? The growth target of 5.5% set by Beijing is called into question. According to World Bank forecasts, the expected growth for 2022 is 4.3%. The economic forecasts do not announce, for the moment at least, a significant recovery for the next two years. The World Bank expects around 5% for the years 2023 and 2024.

This deteriorated economic situation can be explained by various factors, according to Marc Julienne, researcher at the Asia Center of Ifri, responsible for China activities: “Political choices with the “Zero Covid” policy, the succession of strict confinements and the relative closure of the country; a situational factor with the drought, which is hampering industrial production in the west of the country, while the country’s aging demographics are not helping the long-term situation. »

High unemployment

Official figures announce high unemployment, all age groups combined. But it is among young people that the situation is particularly worrying. Nearly 20% of 16-24 year olds would be affected. Unheard of for 40 years. The fault of “a saturated job market in the service sector to the detriment of young graduates” explains Marc Julienne. Nearly 11 million new graduates entered the job market this summer in a slowing economy.

The situation on the real estate market is also critical. The sector would weigh between 25 and 30% of Chinese GDP. However, promoters come up against the government’s debt limitation policies to stem the sector’s colossal indebtedness. Many are finding themselves unable to deliver the homes purchased off-plan by Chinese households.

“Real estate has long been considered a safe haven for households. They invested heavily in it. abounds Marc Julienne. Today, delivery delays are very long and conglomerates are on the verge of bankruptcy. » This is the case of the giant Evergrande indebted to around 300 billion dollars. Recently, some Chinese households have refused to pay monthly installments for homes that are overdue or threatened that they will never be finished.

“Thanks to exponential economic growth, the Chinese people have prospered. Without this growth, there is a major risk of impoverishment of the population,” explains Marc Julienne. Domestic demand is eroding.

The country is also going through a crisis of confidence in the banking sector. Incidents occurred in the central province of Henan. Several banks, weakened by the economic and real estate crises, have suspended cash withdrawals for savers.

Historic heat wave

Added to these difficulties is a situational phenomenon. The country has been experiencing a historic heat wave for several weeks now in the west and in the center of the country. The Yangtze River, whose usual flow is equivalent to almost 50 times that of the Loire, is almost dry.

Rice, corn and soybeans will certainly be lacking this year. 20% of harvests would already be lost. In the Sichuan region, the rivers in the region are dry. A problem in this province which is 80% dependent on hydraulic dams for its electricity supply. The rationing requested by the Chinese authorities is likely to weigh even more heavily on economic activity.

And there is reason to wonder about the prospects. Xi Jinping made it clear that he would not deviate from the strict Zero Covid policy” emphasizes Marc Julienne. In an internal note published in the Chinese press, Ren Zhengfei, the founder and boss of Huawei, giant of smartphones and telecoms, was pessimistic for the future. According to him, the “main purpose” of the Chinese company is now to ensure its “survival”.


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