All China’s economic missteps
All the economic mistakes made by China's leaders and the resulting risks for the country's system, from the real estate crisis to the stock market collapse. The Economist's in-depth analysis
The editorial staff of the Economist issues a harsh warning to those authorities in Beijing who are making so many false steps to the point of compromising their own objectives of relaunching an economy in difficulty . According to the economic weekly, here are the mistakes made by China and the resulting risks for a market grappling with the consequences, among other things, of the real estate bubble and the collapse of the continental stock exchanges and that of Hong Kong.
Missteps in sequence
The most recent Chinese antics reported by the Economist begin with the cancellation without explanation of the new rules on video games from the website of the competent authority a month after the publication of draconian provisions that had caused immediate share losses for tech companies such as Tencent.
But no less tasty is the scene the following day of the governor of the Central Bank who announces during a press conference new measures to "stabilize" that market from which investors are fleeing like hell also due to the decision of the Bank itself not to raise as expected interest rates.
Ineffective concessions
In a country like China that loves to keep finance in its place, the Economist underlines, the aforementioned concessions to market sentiment do not go unnoticed. Also because, the weekly specifies, they have not proven effective at all.
The most recent data show a slowdown in construction, a decline in manufacturing prices, but also the further fall in stock markets recorded after the central banker's press conference and which have aggravated losses that Bloomberg estimated at over a trillion dollars.
What Morgan Stanley says about China
“China is in a condition of de facto fiscal austerity,” Robin , has been declining for three consecutive quarters. These are the symptoms of the most serious deflationary crisis since the Asian financial crash of 1998.
This is why the authorities' regulatory offensive is worrying: in fact, it increases uncertainty which aggravates a picture of overall weakness.
Strengthen the economy but…
The proliferation of government rules and interventions signals the leadership's intention to work to save the real estate market, and economists are already hypothesizing the launch of a public fund with which to provide guarantees to home buyers, but also manage unfinished projects.
The question now is what fiscal stimulus the government will implement after having already raised the level of the deficit and having issued over 140 billion dollars in additional bonds. Signs expected after years in which the economy was supported only by loans from local administrations, but which raise concerns about the possible use of measures that would suffocate the economy rather than give it wings.
The Economist 's whip
“The confidence of consumers, home buyers and entrepreneurs is crucial for the country's recovery”, concludes the Economist , criticizing the Chinese excess of bureaucracy which for now seems to characterize the interventions of a government determined to help its struggling economy .
“The spirits of capitalism – is the conclusion – are unlikely to be revived” if we persist on this slope and above all “if the market continues to issue such ferocious verdicts on the prospects of the economy”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/economia-cina-cosa-succede/ on Sat, 10 Feb 2024 06:39:10 +0000.