Those ready to write off the country underestimate the resources of policy makers and the power of an $18 trillion economy that is home to 1.4 billion people.
The forces that powered China’s growth over the past 20 years have stalled or shifted into reverse. While that hardly qualifies as good news, it’s also not a catastrophe, for China or for the rest of the world.
read this Even beyond this current trouble, economists see China growing at just 3% to 4% a year, or roughly half the pace it averaged in the decade before the pandemic. Its labor force is shrinking, the unprecedented credit and investment expansion that powered growth has been cut in half, and the property market is in ill health and likely to emerge far smaller, according to Logan Wright, director of China research for Rhodium Group.
Worries about an economic collapse “overlooks that Beijing always intervenes and is willing to kick cans down the road to ensure it is a grinding decline versus a U.S.-style collapse,” says Rory Green, head of China and Asia research for TS Lombard. “There are lots of levers Beijing could pull if they wanted.”
But two years after China Evergrande Group , one of the world’s largest developers, collapsed, Country Gardens is flirting with default as it struggles to find home buyers in smaller cities. The embattled developer’s troubles could add to the burden of indebted local governments that have seen land sales dry up, hurting their ability to finance their debt.
Repairing confidence among entrepreneurs to revive investment could snap investors out of their funk. Sentiment among privately owned businesses is crucial because they account for about 90% of urban employment. But Beijing’s erratic and sometimes draconian policies with Covid, its crackdown on internet giants like Alibaba Group Holding and Tencent Holdings , and its decision to let Evergrande default on bonds rather than provide it support, have made businesses skittish.
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