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Macroscope | China’s economic woes – unlike the US and EU’s – will fade with the pandemic
- While the world’s major economies are slowing down, China faces a different kind of economic problem from the US and the EU
- In China, the issue is inadequate demand, which has been flattened by lockdown measures. The solution then is to wait out the zero-Covid policy
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There is no doubt that the global economy is entering an era of recession. Across the board, among the world’s major economies, we are seeing slower growth coupled with inflation.
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The US economy has contracted for two consecutive quarters this year, while the G7 nations managed an anaemic 0.2 per cent growth rate in the second quarter, helped mostly by Italy and Canada. China’s growth figure sank to 0.4 per cent, a level not seen in decades, barring the pandemic-induced dip in 2020.
In the European Union and United States, inflation is still stubbornly high, hovering north of 8 per cent despite rounds of interest rate hikes. And the US Federal Reserve’s rate-hike drive appears likely to continue for a while.
The strengthening dollar and the flow of capital to the US have created devastating ripple effects across the globe, especially on the emerging economies overloaded with dollar-denominated external debt.
So far China has been relatively insulated from that, as domestic inflation is still low and the renminbi’s slide is still measured and under control. China’s remarkably resilient exports sector is probably the only bearer of good news for the economy, having delivered surprises month after month and quarter after quarter.
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But some say the export engine is running out of steam, as global market weakness will eventually be reflected by demand for made-in-China goods.
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