What makes the world's second largest economy tick
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Background explainers, news and analysis on China’s economy, including its opening up, the US-China trade war, the impact of tariffs and trade talks, growth rates and other key economic data, the Belt and Road Initiative, and Greater Bay Area plan.
Economists generally expect that the US’ most aggressive rate-rising cycle in 40 years will end soon, and that any subsequent rate-cut cycle would lead to lower financing costs for businesses – a positive for trade flows.
China’s exports beat expectations in November as shipments to the US grew for the first time since July last year, but analysts doubt if exports can contribute as a pillar of economic growth next year.
China’s dollar-denominated corporate high-yield bonds have lost 22 per cent this year, after a 33 per cent slump in each of the past two years. Defaults by developers, once the pillar of the Asian market, are likely to persist.
Ministry of State Security seeks to quell accusations that China’s revised anti-espionage law has worsened economic decoupling and the operating environment for foreign firms, as they have increasingly claimed.
In a departure from the West’s view on the role of finance, China has made the case for its own perspective on the industry, primarily as a tool for achieving policy goals and a buttress for weak links in the economy.
The commission administering China’s largest state firms has cautioned them to control and prevent risk in their financial subsidiaries and operations, a sign of heightened focus on systemic shortfalls as debt burdens continue to plague smaller institutions.
Banking & Finance
China’s municipalities will see lower default risks at their local government financing vehicles (LGFVs) next year, thanks to a gradual recovery in fiscal revenues and policy support from the central government, analysts said.
Only about three-quarters of China’s population has internet access, but a new infrastructure drive aims to make connecting to a ‘unified’ network as easy as getting water from the tap or flipping a light switch.
The main issue concerning investors is whether central banks are done raising interest rates and, if so, how large any cuts that happen will be. The spotlight shifting from China could offer policymakers more breathing room to act but also risks lulling investors into a false sense of security.
The Chinese leadership’s advocacy for measures to support and spur growth in the private sector economy intensified in 2023, but the protection of private firms’ assets and rights remain a concern.
Much like those who expected a roaring economic recovery in China this year, bears forecasting doom and gloom risk making a costly mistake. Stronger-than-expected data increases the scope for a meaningful rally, and investors would do well to show some humility in their predictions.
Failure to anticipate and prepare for weaker growth would mean the city sleepwalks into stagnation, or worse, lurches from one crisis to another, writes Donald Low – not unlike during the pandemic.
While there are issues to be dealt with, the fundamentals of China’s economy are still sound, the government has ample room to adapt policies and the country’s industrial development will see it through the current property sector downturn and demographic headwinds.
If Beijing wants to get growth back on track, it needs to succeed in key areas where Japan failed following its bad-loan crisis. These include being bold, treating the causes not the symptoms, avoiding policy blunders and having the political will to act
Even after its first foreign investment deficit, China remains an attractive market for many firms, but bureaucrats need to do more to attract business.
Beijing leaders assure nations, regions and groups attending Shanghai showcase that country’s middle-class consumer colossus can drive global recovery.
The announcement that China will lift all restrictions on foreign participation in manufacturing shows the continued shift towards inclusiveness. Assuming the government addresses foreign firms’ concerns, expect more high-quality foreign investment in the manufacturing sector.
As China’s prospects darken, a bullish narrative is growing that India could become the biggest contributor to global growth. But this might be wishful thinking, given that while India has a large and youthful population, its labour force participation rate is worryingly low.