(8 min read)
Chinese Recession : The story of great economic strategy failed after four decades. The Government of China not having great resort/escape policy in pipeline. From poverty to reach the third place in world economy is symbolize the great success China is having in last 50 years. Has China been in recession ?
WHY IS CHINA IN A RECESSION ?
In 2008, China comeback on track after the global financial meltdown in world economy. However, after COVID-19 pandemic phase China still not recovered their economy from unemployment, Higher wage cute ration, Low household consumption, High Capital Investment as compare to Target GDP.
Being a developed nation China feels the heat of recession.
LOW DOMESTIC HOUSEHOLD SPENDING (KEY REASON)
Private debt investment in infrastructure development is key to China’s success. However this days this outside debt investment is problem for China.
Household consumption vs. GDP growth ratio even lowest before and after Covid-19. Still the impacts continues. Many economist from the world identifies this structural imbalance. This is result of Excess Supply of Private Fund and Low Domestic Demand.
Major slow down table for Chinese Economy :
LOW INVESTMENT IN INFRASTRUCTURE
Many economist suggest that is is good for China to achieve their expected GDP (5%). It’s seems impossible as per the current slowdown in economy. However any how it’s achieved still China has double capital investment as compare many developed country like USA.
China has double the investment in infrastructure in compare to USA and still has comparative lower GDP rate. Major reason to worry for China is, Having Debt volume 3 times the GDP.
WILL CHINESE RECESSION AFFECT INDIA?
China import many raw material items from India. Having recession in China may impact the Indian export business. However coin has two side, many big companies like Apple and other tech companies planning to sift their manufacturing units to India. Recently TESLA also planning to manufacture in India.
For India and other Asian continent many new opportunities open the door if China gets sever impact of recession.
STRESS IN PROPERTY MARKET OF CHINESE ECONOMY
In comparison to past years in the year 2022, China has
- Negative 12% Project Investment (12 % lower investment in infrastructure)
- Negative 25% Sale of Floor Carpet Area (25 % lower Sale of property)
- Negative 30% fund Raised (30 % lower investment by private investor or banks)
In the 2010 where Chinese Infrastructure market in boom. Every year market shown the growth year on year growth rate is also good.
However in 2021-2022 from positive growth in all this parameter shown lowest figures as compare to past years.
Infrastructural Growth Model of China Now has reverse effect on own economy. One of the prime reason for low investment in infrastructure is shut down of small business due to Covid-19 , and 21% of young unemployment rate.
CHINA LOW INTEREST RATE POLICY
Recently China announce reduction in interest rates on borrowings. As a result investment in Infrastructure will rise and economy will be back in track. Cut in the interest rate also place heavy load on government reserves. It may also impacts China’s Yuan Value in global market.
Chinese Government does not have any new policy in pipeline to save the economic recession.
Kindly comment your opinion here, about what you feel : Will China recovered from recession Before 2025?
For any suggestion and query please comment here. We love to answer all of you queries.
If you planning to do Business in China and need assistance, drop mail on : caviranchi@yahoo.com
For more business support services visit: www.caviranchi.com
For more valuable updates stay tuned to our Blog.