Chinese President Xi Jinping considered that China’s economic recovery “is still at a critical stage,” during a meeting of the Communist Party’s Politburo on Friday.
China (the second largest economy in the world) recorded growth of 4.9% in the third quarter, slightly below Beijing’s target of 5%, which is one of the lowest rates in years. This is mainly due to the slowdown in domestic consumption and difficulties facing the real estate sector.
The Chinese president called for measures to boost the economy, saying, “The development situation facing the country is complex, with increasing negative factors in the international political and economic environment.”
He added, “It is necessary to focus on accelerating the construction of a modern industrial system and make efforts to increase domestic demand and prevent and defuse risks.”
He also stressed the need to enhance “self-reliance” in the important science and technology sectors and “accelerate the construction of a new development blueprint.”
Officials are making unremitting efforts to protect the recovery from the consequences of the Corona pandemic, even after the strict isolation measures are lifted at the end of 2022.
Exports
Chinese exports rose last month for the first time in 7 months, although the data was compared to low numbers from last year when the repercussions of Corona measures were more clear than others.
Chinese exports, long a key driver of growth, have largely declined since October 2022 except for a short-lived rebound in March and April.
The sudden drop in imports in November highlighted weak consumer activity at home.
China’s exports in general recorded an unexpected increase of 0.5% on an annual basis last month, after 6 months of decline, while imports declined again, according to official figures published Thursday that reflect a limited economic recovery.
Exports are a fundamental driver of growth in China, and their performance is directly reflected in jobs for millions of companies operating in this sector.
Total Chinese exports last month amounted to $291 billion, according to customs. But exports fell year-on-year by 13.8% to the United States and 11% to the European Union. In contrast, exports to Russia recorded an increase of 50.2%.
On the other hand, China’s imports contracted by 0.6% last month after a 3% increase in October, reflecting a decline in domestic demand. Chinese imports declined over a period of 11 months before recording an increase in October.
Rating downgraded to negative
On Tuesday, Moody’s lowered its outlook for China’s credit rating from “stable” to “negative,” citing “broad downside risks to China’s financial, economic and institutional strength.”
The Chinese Ministry of Finance expressed its “disappointment” with this decision, considering that such concerns about China’s economy are “unjustified.”
Real estate sector
But problems in the real estate sector, another traditional engine of growth, have led to growing concerns. China’s huge real estate sector is suffering from a debt crisis, as some of the country’s largest developers owe hundreds of billions of dollars and face the risk of bankruptcy.
The authorities are concerned that debt fears raise buyers’ misconfidence and lead to a decline in house prices, and most importantly, their contagion may affect other sectors.
Confidence in the real estate sector, which represents a quarter of China’s gross domestic product, has been damaged since 2021 when Beijing took strict measures to combat the accumulation of real estate companies’ debt, fueling the debt crisis, and the worsening problems in the sector this year affected the Chinese economy and shook global financial markets. . This accelerated the collapse of the former largest company in the sector, Evergrande, which was given until next January to submit a restructuring plan and avoid its liquidation.
Ting Lu, chief Chinese economist at Japanese bank Nomura, said Thursday that the real estate crisis remains “the biggest obstacle affecting China’s economy.” “Despite several recently announced stimulus measures, we believe it is still too early to predict a bottom will be reached,” he added in a note.
