China slowing down

Shahmir Kazi assesses the current decline visible in Chinese economy

China slowing down has surprised a string of economic analysts over the years with the extraordinary economic development it produced and sustained for well over a decade enabling the country to become the second largest global economy. The analysts however emphasise that China consistently follows policies aimed at exercising arbitrary control over its people along with pursuing goals furthering its typical world view and are unwilling to alter them. Nevertheless, China has made a mark in the global economic annals and its economic growth is widely acknowledged and appreciated. Along with acknowledging the exemplary growth shown by China, doubts remain about long-term sustainability of Chinese economy. Moreover, China’s stance on Russia’s war in Ukraine over the coming months will reshape global flows of money and trade, possibly leading to the emergence of new economic spheres that may ultimately prove antagonistic for China. Russia is already in the grip of international isolation with financial sanctions bitterly biting its economy and China may become the next target in this respect.
As was anticipated by many economic circles that the long run of the Chinese economy may be close to a halt and coming to an end. The Chinese economy is slowing down markedly as strict lockdowns send big cities into hibernation and it is widely observed that repercussions will be felt in Germany, too. The extent of Chinese economic slowdown could be gauged by the fact that industrial output in the Asian nation dropped by almost 3% in April year-on-year. This is considered a considerable downturn and may well prove to be a long term issue for the Chinese economic prospects. It is also mentioned that even worse hit are retail sales, which fell by 11% in April from a year ago as China’s zero-COVID strategy leaves the country’s growth engine stuttering. It is reported that the pandemic is taking a big toll on the economy and this point is tacitly confirmed by various Chinese statistical sources related to the government circles.
The impact of lockdowns in large cities such as Shanghai is also being felt in the real estate market where the value of property sales nearly halved in April year-on-year, the steepest drop since 2006.
While the lockdowns have played a big part in this, it is also the result of the Chinese government’s latest moves to curb real estate speculation. Since the construction sector is crucial to the nation’s economy, the current dent is also weighing on the labour market with the jobless rate currently at around 6% — the highest level since February 2020. The rigid COVID strategy involving curfews is increasingly unpopular in China and these measures are greatly resented by the people who feel extremely restricted pointing out that they are cautious enough to look after themselves and avoid getting contracted by the virus. Quite obviously the Chinese have no credible history of public resentment that has consistently encouraged the dictatorial grip on power by the potent cabal of the ruling apparatus.
Quite interestingly, the Chinese economic downturn is having an impact on Germany as more and more German firms are complaining about supply bottlenecks concerning raw materials and a range of intermediate products as the world’s biggest port in Shanghai struggles to operate at normal levels. The situation is exacerbated by a backlog of container ships waiting to unload or waiting to be loaded. Experts say the port’s export volume has already gone down by 40%. Shanghai is by far the most important foreign port for Germany’s container ship industry. German companies are having a hard time dealing with the backlog of orders. It is mentioned that German corporate orders had reached a new high, meaning that firms would be able to continue working at full capacity for four and a half months without any additional orders coming in the meantime. The order backlog reflects both the high demand for German industrial goods over the past few months, and the difficulties companies are having processing existing orders promptly due to the shortage of key intermediate products and raw materials.
The German government is also watching developments in China with a good deal of concern and many officials point out that should China continue to be mired in lockdowns, more supply snarls and a further cooling of the global economy are possible anticipating that the outlook for the German economy was getting problematic by the day. However, there is hope that the situation in Shanghai will get better soon as is evident by the assertion of the local authorities who insist that the spread of the coronavirus has been halted in large parts of the city leading to a gradual easing of restrictions on the ground. Chinese official point of view is that though the recurrence of COVID slowed down the economy to a certain extent but such effects are just temporary. TW

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Shahmir Kazi works in the private sector with interest in socio-political affairs