China's Economic Outlook: Navigating Challenges and Potential Rebound
Slowed Rebound and Property Slump
China's economic recovery from the impact of Covid-19 has shown signs of slowing since April, with the property sector experiencing a significant slump over the summer. Despite the easing of restrictions on apartment purchases in many large cities, the property market has struggled to regain momentum. However, experts believe that government support and a potential stabilization of the housing market could offer hope for the last quarter of the year.
Expectations of Government Support
Yao Yang, dean of the National School of Development at Peking University, suggests that the central government will gradually loosen restrictions and provide support to the real estate sector. This shift in approach comes after regulators were seen as "overshooting" in their crackdown on the industry. The property sector, which used to account for a significant portion of China's economy, has had a ripple effect on consumption and local government finances.
Long-Term Recovery and Policy Measures
Yao predicts that the central government will allow local governments to borrow more money to repay long-term debts, which could contribute to a full economic recovery by the middle of next year. However, economists do not anticipate a significant return to real estate growth in the future. Dan Wang, chief economist at Hang Seng China, expects housing market weakness to persist with gradual price declines, rather than sudden adjustments. The Chinese government aims for a controlled decline to prevent significant social consequences, as housing is a major source of household wealth.
Combination of Measures for Rebound
The combination of government support and potential stabilization in the housing market could lead to a modest economic rebound in the last quarter of 2023. However, concerns about the real estate sector persist, particularly with highly indebted companies like Evergrande facing liquidity problems. The impact of these challenges on sentiment, both domestically and among international investors, remains a significant factor.
Confidence and Policy Stability
Confidence plays a crucial role in China's economic outlook. Yao emphasizes the importance of confidence, stating that the lack of it correlates with a slowdown in the Chinese economy. While some cities have implemented cash distribution to boost consumption, the central government has been hesitant and has focused on tax cuts, especially for businesses. The lack of formal communication and clarity in economic policies has contributed to growing pessimism among foreign businesses.
Upcoming Meetings and Policy Direction
China's ruling Communist Party is expected to hold the Third Plenum, a meeting that occurs once every five years and focuses on longer-term aspects of the economy. Additionally, the National Financial Work Conference, delayed from last year, will discuss financial development and risks. These meetings, along with the establishment of new commissions overseeing finance and technology, indicate potential policy changes. However, experts do not anticipate major shifts in policy for the remainder of the year.
Modest Growth and Future Outlook
Despite lowered growth forecasts, economists' expectations for China's GDP remain close to or slightly lower than the official target of around 5%. The focus is now on policy stability rather than drastic changes. While concerns and uncertainties persist, China has demonstrated its ability to take corrective actions and stabilize the economy in the face of various challenges in the past.
In conclusion, the last quarter of 2023 will be crucial in determining China's economic trajectory. The government's approach to the real estate sector, policy stability, and international sentiment will play significant roles in shaping the country's economic outlook.
China's Economic Future: Implications for New Business Amid Challenges and Potential Rebound
Slowing Recovery and Property Sector Challenges
China's post-Covid-19 economic rebound has been losing steam since April, with the property market in particular facing a significant slump. Despite attempts to revive the sector, the property market has struggled. However, experts suggest that government support and potential market stabilization could offer a glimmer of hope for the final quarter.
Government Intervention: A Potential Game Changer
Yao Yang, dean of the National School of Development at Peking University, anticipates that the central government will ease restrictions and bolster the real estate sector. This shift, following a perceived overreach in industry regulation, could have a ripple effect on consumption and local government finances.
Long-Term Recovery and Policy Shifts
Yao expects the central government to allow local governments to borrow more to repay long-term debts, potentially aiding a full economic recovery by mid-next year. However, a significant resurgence in real estate growth is not anticipated. The government aims for a controlled decline to prevent major social consequences, as housing is a significant source of household wealth.
Rebound Measures: A Mixed Bag
A combination of government support and potential stabilization in the housing market could lead to a modest economic rebound in late 2023. However, concerns about the real estate sector persist, particularly with highly indebted companies like Evergrande facing liquidity problems.
Confidence and Policy Stability: Key to Economic Outlook
Confidence plays a crucial role in China's economic outlook. Yao emphasizes the importance of confidence, stating that the lack of it correlates with a slowdown in the Chinese economy. The lack of clear communication and clarity in economic policies has contributed to growing pessimism among foreign businesses.
Upcoming Policy Meetings: A Turning Point?
China's ruling Communist Party is expected to hold key meetings focusing on longer-term aspects of the economy and financial development and risks. These meetings, along with the establishment of new commissions overseeing finance and technology, indicate potential policy changes.
Modest Growth and Future Outlook
Despite lowered growth forecasts, economists' expectations for China's GDP remain close to or slightly lower than the official target of around 5%. The focus is now on policy stability rather than drastic changes. While concerns and uncertainties persist, China has demonstrated its ability to take corrective actions and stabilize the economy in the face of various challenges in the past.
The final quarter of 2023 will be pivotal in determining China's economic trajectory. The government's approach to the real estate sector, policy stability, and international sentiment will play significant roles in shaping the country's economic outlook.
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