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China’s Economic Indicators Reveal Signs of Prosperity Despite Gloomy Outlook


Sep 15, 2023

Despite the Chinese government’s efforts to stimulate the real estate sector, which accounts for about 30% of GDP and is the largest contributor to the country’s economy, data shows no significant improvement. This indicates that China’s economy is still facing challenges. However, there are signs of stabilization rather than further deterioration. Policymakers are now seeking additional support to pull the housing market out of its downward spiral.

China’s leadership has made a significant shift in the growth orientation of the real estate sector by dropping the phrase “housing is for living, not for speculation.” This change in approach has led to various mitigation measures, such as reducing down payments and eliminating certain requirements for first-time home buyers.

While economic uncertainty persists due to factors like a weakening renminbi and stock market fluctuations, investment sentiment has slightly improved compared to the beginning of the year. Consumer sentiment has also been gradually improving, with luxury goods sales experiencing a strong comeback after temporary slumps caused by lockdowns in 2022.

Despite the polarized consumption trends across sectors, there has been a notable increase in services like concerts, tourism, and catering. In fact, total bookings on major travel platforms have reached all-time highs. Additionally, subway ridership in major cities has exceeded pre-pandemic levels, indicating a recovery in the tourism and entertainment sectors.

However, it is important to note that high-frequency data can be influenced by factors like the timing of festivals or higher ticket prices for movies. Nonetheless, these segments, while not pillars of China’s economy, have contributed to consumer spending.

The real estate crisis continues to affect China’s economy, dragging down homebuyer and business confidence. Without strengthened policy support, the economy could potentially enter a downward spiral. The government has responded with some policy measures, but data on the real estate sector remains weak, necessitating further action.

China’s weak labor market and high youth unemployment suggest both cyclical problems and long-term changes in fundamentals. The severity of the real estate downturn is not only driven by the pandemic and lockdowns but also by previous policy tightening. The slow understanding of economic policy has contributed to the weaker-than-expected stimulus package.

The uneven recovery across sectors, with solid improvements in domestic travel but deterioration in the real estate market, is a major threat to the overall health of the labor market and businesses. Further policy action is expected in response to weak data next month. While high youth unemployment rates may not immediately threaten social stability, they pose challenges to gender equality and overall economic indicators.

By Editor

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