China recently announced measures to boost its economy, including cuts in lending rates by major banks and reducing foreign exchange reserve requirements for institutions.
These actions aim to address issues in the property sector and counter economic challenges.
Economic Slowdown: China's economic data indicates a slowdown, with GDP growth at 0.8% in the second quarter, projecting annual growth around 3%, which is among the weakest in the last three decades.
Post-Pandemic Expectations: After reopening in late 2022, there were expectations of a spending spree by Chinese consumers and increased investments by private businesses, but economic indicators by the end of the second quarter showed a different picture.
Export Decline: China experienced a significant decline in exports, with the July export numbers plunging by 14.5% compared to the previous year.
Deflation and CPI: China slipped into deflation in July, with the Consumer Price Index (CPI) falling by 0.3%, which can lead to reduced production and job layoffs.
Youth Unemployment: Youth unemployment reached a record high of almost 21% in June, four times the national urban rate.
Economic Model: China's economic model has been driven by debt-fueled investments and exports, which led to a reliance on investment (about 50% of GDP) rather than domestic consumption.
Property Sector Impact: China's property sector, which contributes significantly to GDP, experienced a bubble burst, leading to concerns about developers' debt levels and the ability to complete projects.
Evergrande Group Default: The fall of China's second-largest real estate developer, Evergrande Group, in 2021, marked a significant point in the property crisis.
Liquidity Crisis at Country Garden: The liquidity crisis at Country Garden, one of the largest property developers, adds to concerns in the property sector and the broader economy.
Government Measures: The Chinese government has taken some measures to stimulate house sales and the property sector but has not yet announced full-scale bailouts for struggling developers.
Global Economic Impact: China's economic slowdown is a concern because it has been a major driver of global growth, contributing 41% of the world's growth in the past decade.
Reduced Global Contribution: With China's growth rate declining, its contribution to global economic growth is expected to decrease significantly.
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