Record unemployment and slump in consumption: the Chinese economy worries the world
Record unemployment, retail sales and consumption at a minimum, investments spike. New economic data worries China. And, consequently, the whole world including Italy given the already numerous economic difficulties linked to the tail of the pandemic from Covid-19, as well as the war in Ukraine and the very strong inflation on raw materials and energy. Now, from Beijing, the lethal blow is in danger. Double, however, both towards President Xi Jinping and towards the global economy.
Let’s start with the numbers. Meanwhile, from those linked to unemployment, che in April was equal to 6.1%, a figure very close to the historical one recorded in February 2020 (6.2%), when the pandemic broke out. With all the related social risks linked to this figure, which could be downward considering how traditionally migrant workers escape official surveys. The data concerning young people is particularly alarming between 16 and 24 years, where the unemployment rate reaches 18.2%.
But Chinese analysts are particularly concerned about retail sales, which in April fell 11.1% on an annual basis. It is the second month in a row that there is a negative figure for this index (in March there was a -3.5%). Industrial production also fell (-2.9%), especially in the areas of the Yangtze River delta and in northeastern China. Both areas have been subject to drastic anti-Covid measures following the detection of the Jilin and Shanghai outbreaks. But the decline is generalized, with real estate sales plunging by 46.6%.
Xi’s Zero Covid strategy sinks the Chinese economy
The incoming signal from the data is clear, as well as multifaceted. In the meantime, again starting from the numbers, it seems clear how to reach the goal of a growth of 5.5% in 2022 as established by the recent “two sessions” (the most important legislative event of the Chinese political year) is difficult if not impossible to achieve. At a macro level, it is equally clear that the historic goal of completing the transition of the Chinese economic system from a “factory of the world” to a consumer society is still far away.
The internal market, which has grown enormously in recent decades, is not enough to support the economy still based on exports and debt-based infrastructure investments. THEl slight increase in infrastructure investments increase in infrastructure investments it also reveals the authorities ‘reluctance to focus once again on the old strategy of financing in stale assets which, while on the one hand has allowed the country to overcome various phases of crisis, on the other has made local governments’ debt soar.
But there is also a huge political figure. The main cause of the worrying numbers on the Chinese economy seems to be, in addition to the effects of the war in Ukraine, especially the zero Covid strategy by Xi Jinping. They are in fact precisely the lockdowns imposed to contain the spread of the Omicron variant to sink the Chinese economy. So much so that the Chinese Communist Party establishment has expressed serious concerns, starting with Premier Li Keqiang. And despite the directives of Xi Jinping, who has decided to continue with his strategy to the end even in the face of economic consequences.
Between rumors of anti-Xi movements in China and the global impact of the slowdown in Beijing
From the beginning Xi presented the one against the coronavirus as a war to be won against the “demon” Covid. A war to be won at all costs not only and not so much for economic aspects, but also and (perhaps, many are beginning to fear) above all to have an important medal to be presented on the field in view of the XX Party Congress scheduled for next year Autumn. But to pin that medal is risking to jeopardize economic growth.
For this, according to various rumors, fragments of the Party are trying to loosen Xi’s policies and revise at least parts of his rectification campaign, leaving a less tight rein to real estate giants or digital ones. Also because it is precisely on the economic stability that the social pact between the Party and the Chinese population is based. And there are also those who speak of more or less real plots that could jeopardize the third term of the “new helmsman”. In between, certainly the bugbear of another chapter of crisis with global repercussions.
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