Close Menu
TechCentralTechCentral

    Subscribe to the newsletter

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    Facebook X (Twitter) YouTube LinkedIn
    WhatsApp Facebook X (Twitter) LinkedIn YouTube
    TechCentralTechCentral
    • News

      Vodacom’s Maziv deal gets makeover ahead of crucial hearing

      18 July 2025

      Cut electricity prices for data centres: Andile Ngcaba

      18 July 2025

      Takealot taps Mr D to deliver toys, pet food and future growth

      18 July 2025

      ‘Oh, Ani!’: Elon’s edgy bot stirs ethical storm

      18 July 2025

      Trump U-turn on Nvidia spurs talk of grand bargain with China

      18 July 2025
    • World

      Grok 4 arrives with bold claims and fresh controversy

      10 July 2025

      Samsung’s bet on folding phones faces major test

      10 July 2025

      Bitcoin pushes higher into record territory

      10 July 2025

      OpenAI to launch web browser in direct challenge to Google Chrome

      10 July 2025

      Cupertino vs Brussels: Apple challenges Big Tech crackdown

      7 July 2025
    • In-depth

      The 1940s visionary who imagined the Information Age

      14 July 2025

      MultiChoice is working on a wholesale overhaul of DStv

      10 July 2025

      Siemens is battling Big Tech for AI supremacy in factories

      24 June 2025

      The algorithm will sing now: why musicians should be worried about AI

      20 June 2025

      Meta bets $72-billion on AI – and investors love it

      17 June 2025
    • TCS

      TCS+ | Samsung unveils significant new safety feature for Galaxy A-series phones

      16 July 2025

      TCS+ | MVNX on the opportunities in South Africa’s booming MVNO market

      11 July 2025

      TCS | Connecting Saffas – Renier Lombard on The Lekker Network

      7 July 2025

      TechCentral Nexus S0E4: Takealot’s big Post Office jobs plan

      4 July 2025

      TCS | Tech, townships and tenacity: Spar’s plan to win with Spar2U

      3 July 2025
    • Opinion

      A smarter approach to digital transformation in ICT distribution

      15 July 2025

      In defence of equity alternatives for BEE

      30 June 2025

      E-commerce in ICT distribution: enabler or disruptor?

      30 June 2025

      South Africa pioneered drone laws a decade ago – now it must catch up

      17 June 2025

      AI and the future of ICT distribution

      16 June 2025
    • Company Hubs
      • Africa Data Centres
      • AfriGIS
      • Altron Digital Business
      • Altron Document Solutions
      • Altron Group
      • Arctic Wolf
      • AvertITD
      • Braintree
      • CallMiner
      • CambriLearn
      • CYBER1 Solutions
      • Digicloud Africa
      • Digimune
      • Domains.co.za
      • ESET
      • Euphoria Telecom
      • Incredible Business
      • iONLINE
      • Iris Network Systems
      • LSD Open
      • NEC XON
      • Network Platforms
      • Next DLP
      • Ovations
      • Paracon
      • Paratus
      • Q-KON
      • SevenC
      • SkyWire
      • Solid8 Technologies
      • Telit Cinterion
      • Tenable
      • Vertiv
      • Videri Digital
      • Wipro
      • Workday
    • Sections
      • AI and machine learning
      • Banking
      • Broadcasting and Media
      • Cloud services
      • Contact centres and CX
      • Cryptocurrencies
      • Education and skills
      • Electronics and hardware
      • Energy and sustainability
      • Enterprise software
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Lifestyle
      • Motoring
      • Public sector
      • Retail and e-commerce
      • Science
      • SMEs and start-ups
      • Social media
      • Talent and leadership
      • Telecoms
    • Events
    • Advertise
    TechCentralTechCentral
    Home » Investment » Chinese economy at risk of deeper slowdown than many realise

    Chinese economy at risk of deeper slowdown than many realise

    By Agency Staff25 October 2021
    Twitter LinkedIn Facebook WhatsApp Email Telegram Copy Link
    News Alerts
    WhatsApp

    China’s economy risks slowing faster than investors realise as President Xi Jinping’s push to cut its reliance on real estate and regulate sectors from education to technology combine with a power shortage and the pandemic.

    Bank of America and Citigroup are among those sounding the warning that expansion will fall short this year of the 8.2% anticipated by the consensus of economists. The slump could last into next year, forcing growth below 5%, they warn. Outside 2020’s 2.3%, that would be the weakest in three decades.

    Strategists at Bank of America muse that Xi may even be embracing a once-in-two decades restructuring of the economy akin to Deng Xiaoping’s modernisations of the late-1970s and Zhu Rongji’s revamping of state-enterprises and finance in the 1990s.

    Among those at risk from less investment in China are commodity exporters such as South Africa

    “If so, the data flow from China could confound even the pessimists, and we are on guard for that scenario unfolding,” the strategists, led by Ajay Kapur, told clients in a report last week, in which they predicted growth of 7.7% this year and 4% in 2022.

    Beijing is determined to shift its economic model from its boom years, in which the country loaded up on debt and propelled itself to become the second largest economy.

    Xi is now overseeing a plan to stabilise debt growth — in order to ease financial risks — curb inequality and channel financial resources into hi-tech manufacturing to counter the threat of technology restrictions from the US.

    Data released last week already showed a sharp slowdown in growth to 4.9% in the third quarter from 7.9% in the previous quarter, with more pain likely to come as electricity shortages persist.

    Slower than expected

    Even before the pandemic hit, China was surprising economists with slower-than-expected growth caused by Beijing’s resolve to ease debt risks, which meant it avoided broad stimulus even as the US-China trade war threatened expansion.

    After modest easing to cushion the worst effects of the coronavirus, its debt-control policy resumed, with real estate companies such as China Evergrande Group feeling the biggest impact.

    Xi also set about seeking to reshape the consumer technology, private tutoring and real estate sectors, with officials arguing they represent a wasteful use of the country’s limited resources. Officials have mostly embraced the resulting slowdown.

    China’s Premier Li Keqiang in March announced a growth target of “above 6%” for the year. While analysts saw this as a signal that Beijing was prioritising other policy goals such as financial stability and environmental protection above economic growth, most at the time saw the target as extremely conservative.

    “I’ve joked that maybe Li Keqiang knew more than we did,” said Bert Hofman, a former director of the World Bank’s China office who now heads the National University of Singapore’s East Asian Institute.

    But Beijing has signalled in recent weeks that it could loosen some policies, telling banks to pick up the pace of mortgage lending even as it repeated vows not to use the property sector as a short-term stimulus.

    Any policy loosening in the next few months will be aimed at “preventing disaster” rather than supporting growth, Hofman said. “As long as growth is above 6%, I think China would feel relatively happy,” he added.

    People’s Bank of China Governor Yi Gang recently said he sees about 8% expansion for this year, and to achieve that, the economy would only need to expand 3.9% in the current quarter, according to calculations from Bloomberg Economics.

    China’s slowdown comes as the global recovery from Covid-19 risks losing momentum.

    For now, even the most pessimistic economists expect growth to come in above 7.5% this year, a relatively rapid rate for an economy the size of China’s

    “When China’s economic engine sputters, growth fizzles the world over,” said Frederic Neumann, co-head of Asian economic research at HSBC Holdings in Hong Kong.

    Among those at risk from less investment in China are commodity exporters such as Australia, South Africa and Brazil. Slower trade could also hit the likes of Malaysia, Singapore and Thailand. The impact could be felt further afield, according to Tuuli McCully, Singapore-based head of Asia-Pacific economics at Scotiabank.

    “Countries such as Chile and Peru ship significant amounts of commodities to China and will feel the impact of weaker real estate and other fixed asset investment activity in China,” she said.

    Financial market spillovers may be more contained given the 18% peak to trough correction in China’s CSI 300 Index this year did not spark global contagion, said Alvin Tan, head of Asia foreign-exchange strategy at Royal Bank of Canada in Hong Kong. One possible upside from a cooling Chinese economy is that it could alleviate global inflation pressures, Tan said.

    ‘Decidedly negative’

    “Nonetheless, the net impact is decidedly negative for a world that is still recovering from the pandemic,” Tan said.

    For now, even the most pessimistic economists expect growth to come in above 7.5% this year, a relatively rapid rate for an economy the size of China’s. Beijing has set a goal of doubling GDP from 2020 levels by 2035, which implies annual growth of around 5%. That may prove to be a floor for policy makers.

    China could see real estate investment fall 10% in the first half of next year and still achieve 5% annual growth as its credit cycle is close to its bottom and fiscal policy could pick up ahead of a crucial Communist Party congress in the northern hemisphere autumn, said Bo Zhuang, China economist at Loomis Sayles Investments Asia.

    He predicts Beijing could set a growth target around 5.5% for next year.

    Still, the recent weakness when combined with concerns over Evergrande is prompting analysts to wonder if they remain too sanguine on near-term prospects.

    Bank of America’s strategists outlined a “bearish scenario” involving a disorderly adjustment to the real estate market in which property prices fall 10%, cutting sales and deterring banks from lending to the sector. In that scenario, growth could reach as low as 7.5% this year and 2.2% in 2022.

    The other risk is that China’s policy makers may struggle to flick the switch back to growth mode if they feel that’s needed. Citigroup economists led by Xiangrong Yu noted that the electricity shortages that are crimping industrial production will make it harder to cushion growth by boosting investment in infrastructure. That kind of policy could only work next year once the power crunch eases, they said.

    Local governments are also struggling to find viable projects to invest in while property developers’ tight financing has slowed their land purchases, threatening to undermine a US$1-trillion revenue source for local governments.

    “Property and energy problems will continue to affect growth in the fourth quarter,” said Houze Song, a China economy researcher at US think-tank, the Paulson Institute. It “seems likely that full year growth will end below 8%.”  — Reported by Tom Hancock and Enda Curran, (c) 2021 Bloomberg LP



    Xi Jinping
    Subscribe to TechCentral Subscribe to TechCentral
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email Copy Link
    Previous ArticleShiba inu falls from record after Musk says he doesn’t own any
    Next Article PayPal denies it’s in talks to buy Pinterest

    Related Posts

    Latest US offensive against China risks faster technological decoupling

    8 January 2025

    Xi seizes role as global defender of free trade against Trump

    17 November 2024

    China is better prepared for Trump 2.0

    6 November 2024
    Company News

    Vertiv to acquire custom rack solutions manufacturer

    18 July 2025

    SA businesses embrace gen AI – but strategy and skills are lagging

    17 July 2025

    Ransomware in South Africa: the human factor behind the growing crisis

    16 July 2025
    Opinion

    A smarter approach to digital transformation in ICT distribution

    15 July 2025

    In defence of equity alternatives for BEE

    30 June 2025

    E-commerce in ICT distribution: enabler or disruptor?

    30 June 2025

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2025 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.