CHINA’S ECONOMY SLOWS IN NOVEMBER

Listen to Article

China’s economy slackened in November, thanks to a lagging consumer economy and the persistence of the COVID virus.

The property market, which makes up almost a third of China’s GDP, stumbled with the failure of major developers Evergrande Group and Kaisa Group to be able to pay their debts, resulting in both corporations being declared in default earlier this month, as we reported in “Evergrande in Default, Fitch Says” (14 Dec 2021).

Several indicators highlighted the economy’s lethargy:

  • new home prices declined 0.33 percent from October through November across 70 cities, the worst month-to-month slip in six years;
  • new construction starts were off 9.1 percent year on year in November, worsening from a 7.7-percent slip in October;
  • retail sales edged up 3.9 percent in November from a year previous, sliding from October’s 4.9 percent and missing analysts’ expectation of 4.5 percent;
  • a variety of service industries were hampered by China’s zero-tolerance policy for COVID infections, with catering shrinking by 2.7 percent after losing 2 percent in October.

Beijing is expected to set a growth target of at least 5 percent for the new year, in part to prod local governments to spend more, The Wall Street Journal reported; meager local spending has weighed on the economy in recent months.

Earlier this month, the People’s Bank of China reduced banks’ cash reserve requirements, freeing more cash to be available for loans.

TREND FORECAST: Should the Chinese economy continue to weaken, we forecast its central bank will lower reserve requirements even more in the next few months.

As we have reported, the government already has loosened rules governing mortgage lending and may ease regulations further on the property market. 

Moreover, despite the economy weakening, China’s GDP growth is stronger than other major nations. And minus a global economic meltdown, we forecast it will continue to grow at higher rates than the U.S., Japan, Germany, U.K., etc.

0 Comments

Leave a reply

©2021 The Trends Journal

Log in with your credentials

Forgot your details?