Yet available options appear politically unpalatable
These reports have been accompanied by even scarier metaphors. China’s economy is a “ticking time-bomb”, according to America’s President Joe Biden, because of its ageing workers and unemployed young. Others think it is suffering from “long covid” because of the private sector’s “immune response” to Xi Jinping’s meddlesome rule.
per person now exceeds $20,000, above the global average. The most wretched poverty has been eliminated. Those 12 trading firms have been succeeded by tens of millions of others, turning China into the world’s biggest exporter of goods by 2009, and perhaps its biggest exporter of cars this year. The country’s manufacturingexceeds America’s and the European Union’s combined, churning out chips, ships and industrial sewing machines .
This bout of spending was, however, considerably briefer than hoped. And, crucially, it did not lift morale sufficiently to sustain a broader recovery of spending. In April consumer confidence fell back to last year’s lows, according to the National Bureau of Statistics, which promptly stopped releasing the figure . Foreign direct investment all but vanished in the second quarter, falling by 87% year-on-year to $4.9bn, as multinationals repatriated their earnings rather than reinvesting them.
Yet low confidence may have more mundane explanations. Households may be despondent because employment is insecure, wages are stagnant and assets, especially houses, are losing value. If so, morale should pick up if the job and housing markets improve. The animal spirits of private entrepreneurs should also revive if their sales regain momentum.
Lifting sales back to such a level would require bolder macroeconomic manoeuvres from China’s policymakers. Lower interest rates would make new mortgages more affordable, although they would be of little immediate assistance to existing borrowers, since mortgage refinancing is difficult in China. The People’s Bank of China, the country’s central bank, this week surprised observers by deciding not to reduce the five-year loan-prime rate, which serves as a benchmark for mortgages.
Belgique Dernières Nouvelles, Belgique Actualités
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