When China abandoned its zero Covid policies at the end of 2022, all bets were on a rapid rise in economic growth.
In reality, it hasn’t happened. Retail sales and investment are far less than expected.
Analysts now think the economy may not have grown at all in the second quarter and will struggle to achieve the modest GDP target of 5 per cent at the end of 2023.
The main culprit? The end of the property boom with scores of significant property developers going bust.
As history has shown, property bubbles rarely end well. Construction companies and all their associated services needed for housing building and, consequently sales, are dragged down markedly, hurting the economy.
Because homeowners are less likely to spend money if they are worried about their most valuable asset, inevitably [this] results in depressed consumption.
Even if China wanted to foster more consumption-led growth, it would not easily be able to do so.
Many of the Government’s economic policies are still designed to promote exports and investment and to suppress consumption.
Sustainably boosting household spending such as building up sturdier safety nets would take years to accomplish.
The current property gloom casting a shadow over China’s economy is not just for the rest of the year, but far into the future.
Lessons for New Zealand perhaps?
Gary Hollis
Mellons Bay
