Fear of China in the global economy – Breaking economy news – Spokesperson
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The Chinese economy is struggling with deflation, the crisis in the real estate sector and the negative effects of climate problems. Negative developments in China are expected to affect the global economy as well.
Due to new stress in the real estate market and deflation that threatens the growth outlook Chinese alarm bells began to ring in the economy. Experts stated that China may not be the driving force of global growth due to the deflation experienced.
While official data show growth rates are still well below pre-pandemic levels, July saw modest increases in industrial production, retail sales and fixed asset investment from a year ago.
FEAR FLARED IN THE REAL ESTATE SECTOR
In addition, the increased probability of default by one of the giants in the real estate sector, combined with the loss of confidence and the continued decline in housing sales, increased the concerns in the real estate sector.
According to media reports, real estate giant Country Garden’s USA Missing interest payments on two dollar-denominated bonds plunged the company into a major payments crisis. The company has 30 days to avoid a formal default.
FEAR OF DEFLATION
Last week, the ongoing decline in producer prices and stagnation in consumer prices in China also increased the concerns about the risk of deflation.
While the downward trend in producer prices continued in July, consumer prices decreased for the first time since February 2021. In July, the Producer Price Index (PPI) decreased by 4.4 percent and the Consumer Price Index (CPI) decreased by 0.3 percent compared to the same period of the previous year.
Due to these problems, Beijing has made several commitments and announced measures to support growth. But it avoided monetary and financial stimulus of the kind used in previous downturns. A weaker yuan and higher debt levels have caused Beijing to be more cautious.
IT WILL AFFECT THE GLOBAL ECONOMY
These problems in the Chinese economy are expected to deeply affect the global economy. In its latest assessment, the International Monetary Fund (IMF) counted China among the downward trends in the risk balance.
The IMF said the recovery of the world’s second-largest economy after the corona virus outbreak has slowed, and if it slows further, cross-border effects are likely.
MOODY’S ECONOMIST WARNED
Harry Murphy Cruise, economist at Moody’s Analytics, also warned that the sluggish recovery in China will hamper global growth in the medium term, the Guardian reported.
Moody’s economist said, “In past downturns, we have generally focused on China as a growth driver. “As we deal with structural concerns in the Chinese real estate market and the disruption in the transition to consumer-led growth, this impetus may not be as supportive this time.”
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