Hong Kong CNN —
Dark clouds have hung over broad swathes of China as the country’s economy has struggled to regain momentum for much of the past year since the country reopened to the world after the coronavirus pandemic. .
Bright young people in this country are having a hard time finding work. White-collar professionals are facing pay cuts and layoffs. Entrepreneurs are struggling to raise capital and pay off debt. Middle-class families are seeing their wealth eroded by the collapse in house prices. and competition among the wealthy to move funds overseas.
In the months leading up to Tuesday’s 75th anniversary of the founding of the People’s Republic, the mood was summed up by a new buzzword: “the trash era of history.” Just as in the final minutes of a basketball game when one team was trailing by such a large margin that all efforts to win seemed in vain, some Chinese believe their country is going through tough times as well and is hoping for a turnaround. I believe there is little hope.
This pessimism was a far cry from the bright outlook just five years ago, when the last major National Day celebrations took place in 2019. At the time, economists were rushing to predict when China would overtake the United States as the world’s largest economy. Those conversations don’t happen very often anymore. Recent talk has focused on how the Chinese government can avoid a repeat of Japan’s “lost decade” economic stagnation after the bursting of the housing bubble in the 1990s.
Last week, after months of increasingly grim economic data, Chinese leader Xi Jinping finally agreed to a much-needed stimulus package to boost confidence in the world’s second-largest economy.
The country’s central bank announced a raft of measures on Tuesday to combat falling prices, including freeing up lending from commercial banks and making borrowing cheaper for households and businesses.
Authorities continued their positive drumbeat the next day, announcing unusual cash handouts to disadvantaged citizens and promising grants to new graduates struggling to find work.
And on Thursday, 24 members of the ruling Communist Party’s Politburo continued their bullish message. Mr. Xi broke with tradition and dedicated the group’s September meeting to economic issues.
Government officials acknowledged “new conditions and problems” in the economy and called for urgent action to increase fiscal spending, halt the decline in the real estate market and reduce the number of new graduates and migrant workers. vowed to improve employment.
“It’s rare to see so many policies rolled out at once, underscoring the urgency for policymakers to support the economy,” said Shu Tiancheng, senior economist at the Economist Intelligence Unit. Ta.
The policy blitz injected adrenaline into the country’s gloomy stock market days before the week-long National Day that begins on Tuesday. Chinese blue-chip stocks soared more than 15% last week, the biggest single-week gain in about 16 years. Hong Kong’s Hang Seng index rose 13%, its best week since 1998, Reuters reported.
The frenzy continued on Monday, with combined sales on the Shanghai and Shenzhen stock exchanges exceeding 1.8 trillion yuan ($228 billion), a record high, according to state-run business paper Security Times. This is despite the official Purchasing Managers Index (PMI), a key indicator of factory activity, falling for another month in September.
Some big-name investors are also excited about the rally. David Tepper, the billionaire founder of American hedge fund Appaloosa Management, said in an interview on CNBC on Thursday that he plans to buy more “everything” related to China.
The stock market may be in the midst of its most remarkable turnaround, but economists say much more will be needed to reverse China’s economic decline.
“Stock market stimulation doesn’t really help China’s real economy. Compared to other major markets, very few people invest in the stock market,” said Logan Wright, director of China market research at Rhodium Group. spoke.
Economists at Barclays said in a research note earlier this month that Chinese households are suffering a huge loss of wealth, estimated at $18 trillion, due to the downturn in the housing market. This is nearly five times China’s per capita gross domestic product.
Wright said the stimulus package “makes leadership seem more reactive and more sensitive to economic downturns.” And that’s what created more positive emotions (last week). But nothing really changes in terms of the structural outlook. ”
China’s decades of investment-driven growth have reached a “stalemate” and rebalancing the economy towards a more sustainable consumption-driven growth model requires income redistribution and transfers to households. A fundamental overhaul of the fiscal system, including expansion, is needed, Wright said.
The package of measures announced last week did little to address the underlying structural problems weighing on economic growth.
China has long had one of the highest savings rates in the world. While one-off cash transfers and subsidies may boost consumption in the short term, Chinese households feel more secure in the long term to spend more, especially after the collapse of the real estate sector, where the majority of Chinese invest their assets. Strong social welfare and medical care is needed to enable this. savings.
The outlook for the real estate industry, which accounts for about a quarter of China’s economy and 70% of household assets, remains bleak.
“There’s not much the Chinese government can do,” Wright said. “In many ways, the adjustment in the real estate sector is almost complete, but policies have not done much to stabilize the real estate sector.”
After decades of boom, China’s real estate sector is now in its fourth year of contraction since it plunged into a deep crisis in 2020 when the government cracked down on excessive borrowing by developers to curb high debt levels. There is. China’s government efforts to rescue the market have struggled to revive demand, and new home prices continue to fall.
In a concerted effort to shore up the crowded real estate market, the southern metropolis of Guangzhou on Sunday became China’s first Tier 1 city to lift all restrictions on home purchases, with Shanghai and Shenzhen also imposing restrictions on homebuyers. has been eased.
The country currently has so many vacant apartments that even its entire population of 1.4 billion people don’t have enough to fill them. To make matters worse, the population has been declining for the past two years, and demographic changes could further inhibit future growth.
The Chinese government’s efforts to promote fertility have all but failed. More and more young people are delaying marriage and childbearing, if not forgoing it altogether. Many people are fed up with “regression” or are experiencing burnout. It’s a catchphrase that describes the intense competition that has dominated our lives, from striving to excel in school to building a career. Some people passively resist societal pressures and resort to “laying down” or “rotting” trying hard enough to survive.
These buzzwords encapsulate the growing sense of hopelessness among China’s disillusioned youth. Some people feel that the trajectory of their lives is increasingly divergent from the expected upward trajectory outlined in President Xi’s “China Dream,” a grand vision of “unstoppable” national rejuvenation. I am aware that there is.
China’s Generation Z, who grew up in an era of tremendous economic growth and ever-improving living standards, now realize that they may not fare as well as their parents, a generation that accepted limited freedoms in exchange for promised prosperity. I’m thinking.
In recent years, young Chinese people have seen personal freedoms curtailed under President Xi Jinping’s dictatorship and job prospects dimmed in a struggling economy.
From big tech companies to private tutoring, President Xi’s crackdown on the private sector has eliminated many jobs that were once available to new Chinese graduates. Youth unemployment rose to 18.8% in August, the highest since authorities changed the way they exclude students last year.
This poses potential problems for the Communist Party, which has staked its legitimacy on the country’s unprecedented growth for decades. As the economy slows, Mr. Xi has strengthened nationalism, another pillar of his regime’s legitimacy, and is expected to invoke it to mark the country’s 75th anniversary on Tuesday.
But Alfred Wu, an associate professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore, said China’s leaders “are not willing to abandon the economic performance debate just yet.”
“They want to restore confidence in the economy, but the party’s biggest headache is that it does not have an effective solution to the economic slowdown.”
