A report published byAxiosChina faces a complex economic ordeal, as it must choose between introducing more stimulus to prop up the economy, or withdrawing government stimulus that fueled the real estate bubble, and risking a deeper economic slowdown that could lead to social unrest.
In the past weeks, Beijing published statistical figures that showed its economy’s suffering to recover from the Covid-19 era, prompting US President Joe Biden to warn that these problems make China a “time bomb.”
The Axios report confirms that China has indeed recently reported a large package of weak economic data. The collapse of the financial and real estate sectors could plunge the country into recession.
He added that the mishandling of the real estate debt crisis could cause a continuation of the recession, as Japan experienced in the nineties.
On Wednesday, China acknowledged that the post-pandemic recovery of the world’s second-largest economy would be difficult, but refuted Western criticism after a series of disappointing statistical indicators.
And the Chinese real estate giant, Country Garden, which is facing crisis, announced “great doubts” about the repayment of its bonds, exacerbating concerns about the heavily indebted Chinese real estate sector.
The company said in a statement published by the Shanghai Stock Exchange, on Wednesday, that “there are great doubts at the present time regarding the payment of the company’s bonds.”
The company, which was included in the Forbes list of the 500 largest in the world, had expected to record billions of dollars in losses with the risk of default.
A collapse of Country Garden would have disastrous repercussions for the Chinese financial system and economy, as would the case for its heavily indebted competitor Evergrande.
But Chinese Foreign Ministry spokesman Wang Wenbin said, “In the wake of the smooth transition from epidemic prevention and control, China’s economic recovery is an undulating and tortuous process that will undoubtedly encounter difficulties and problems.”
He pointed out that “a number of politicians and the media in the West exaggerate the cyclical problems in the process of economic recovery in post-pandemic China,” adding, “but in the end, they will inevitably be proven wrong.”
These statements came the day after Beijing announced a halt to the increasing unemployment rates among young people, in light of a series of disappointing indicators that raise concerns about the second economy in the world.
Youth unemployment, aged between 16 and 24, recorded a record 21.3 percent in June, while the overall unemployment rate rose from 5.2 percent in June to 5.3 percent in July, according to the National Bureau of Statistics.
Years of government stimulus policy encouraged a wave of infrastructure and real estate development in cities across China, which in turn led to rapid economic growth.
In July, China recorded a contraction in prices for the first time in more than two years, under the weight of slowing domestic consumption.
2023-08-17 01:04:51
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