A poll by Caixin news agency on Monday showed China’s economy foundering as it entered the second half of 2022, with slower manufacturing activity, higher unemployment and a slump in the property market.
China’s weakening economy has reduced demand for oil, combined with low production figures from other countries to bring down oil prices below by four percent.
The Caixin poll were found that Chinese manufacturing activity slowed significantly in July – or possibly even contracted – after the last round of coronavirus restrictions ended in June and sparked a boom in output.
China Beige Book International (CBBI), an investor advisory firm, he said July factory output slowed to levels not seen since mid-2020 and retail unemployment hit a two-year high – signs that Chinese citizens and business managers “just don’t believe their Covid Zero nightmare is over”.
“Retail trade is in the biggest problem. Steady death is almost certainly happening in the sector now,” said CBBI chief economist Derek Scissors, underlining fears that coronavirus lockdowns could strike again at any time, without warning.
Other economic surveys found China’s property market slipping 33% after surging 89% since restrictions ended in June, gross domestic product (GDP) rose just 0.4% in the second quarter and consumers nervous despite modest 3.1 percent post-lockdown gain in retail spending.
Consumer spending may be stagnant as weak factory output and highly publicized layoffs leave many Chinese workers worried about their jobs. Some are taking advantage of a real estate bubble to sell their homes for cash, making up for lost income due to downsizing and layoffs.
Analysts have compared the current situation unfavorably to China’s recovery from the market crash and banking scandals of 2015, because consumer spending continued to grow in 2015, while today it has stagnated. Also, today’s real estate industry has widespread and much-discussed problems that could prevent it from saving the rest of the consumer economy.
When China’s troubled real estate giant China Evergrande Group failed to deliver on its promised $300 billion restructuring plan over the weekend, analysts said CNBC Loss of confidence in real estate can create a “negative feedback loop” that drags down the rest of the Chinese economy.
China’s real estate industry is already in the grip of an unusual “mortgage revolt,” with homeowners refusing to make their payments because they believe developers will not complete construction and renovation projects.
“If this problem is not dealt with properly, it will have a profound impact on the economy, including the government’s balance sheet, the banks’ balance sheet as well, as well as households,” Standard Chartered economist Shuang Ding told CNBC.
Ding noted that the real estate crisis could cause significant damage to the Chinese government’s finances, as provincial governments get much of their revenue by taxing land sales. The impending collapse of the titanic Evergrande is choking the market by spooking investors, while individual homebuyers are venting their frustrations through a mortgage revolt.