The Chinese economy is going from bad to worse and we're only in February.
Figures released on Thursday showed that consumer prices fell 0.8% in January, beating economists' expectations and marking the biggest contraction in 15 years.
Prices in China have been stable or almost continuously falling since July. Despite the country's zero-covid policy being abandoned a year ago, consumers remain cautious when it comes to spending on both daily goods and real estate, traditionally the engines of growth in China's gross domestic product. Slowed income growth and high unemployment rates are putting downward pressure on wages for some workers.
Some economists worry that continued low demand in China could have knock-on effects around the world, as it begins to rely on demand from other countries to revive its economy.
The concern is particularly acute at a time when policymakers in Beijing are seeking to offset the real estate sector's downward spiral by betting big on industrial production, particularly green technologies such as electric vehicles and solar panels. Banks have been encouraged to increase lending to manufacturers, while lending to the real estate sector has declined. Increase in exports due to trade tariffs and the shedding. The UK is already investigating whether Chinese excavators are being sold at unfairly low prices, while the European Union has launched an anti-subsidy investigation into Chinese electric vehicles, which has shocked Beijing.
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“China needs to act quickly and aggressively to avoid deflationary expectations among consumers,” he said. Reuters Zhiwei Zhang is chief economist at PinPOINT, a Hong Kong-based asset manager.
China's National Bureau of Statistics said the year-on-year decline in consumer prices was partly explained by the fall in January of the Lunar New Year holiday, which traditionally boosts spending in 2023. This year it starts on 10th February.
Analysts now wonder if the Year of the Dragon will blow Chinese economy The fire he desperately needs. In particular, food prices, which fell 5.9% in January, are expected to receive at least a short-term boost as people gather for New Year's celebrations. One of the biggest drags on prices was pork, which fell 17%.
But long-term crises in the Chinese economy remain stubborn. Unlike previous crises, Beijing did not intervene with a massive stimulus package. Chinese President Xi Jinping says he wants to focus on “high-quality growth” rather than the double-digit acceleration China experienced in the early 2000s. All eyes are now on the two sessions of the country's annual parliamentary sessions, which begin on March 5. . The growth target for 2024 is expected to be similar to last year's 5%. That's a modest number by Chinese standards, but it could be the new normal for the world's second-largest economy.
Translation: Lygia M. Oliver
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