\u201cWe believe domestic demand will remain constrained by sluggish consumer confidence, deflationary pressures, and investment headwinds that have broadened beyond the property-sector correction and are amplified by the local-government debt overhang,\u201d it said in a report on Jan. 22.<\/p>\n
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<\/p>\n
But more than four years since China popped a construction bubble, about 80 million unsold or vacant homes continue to weigh on sales, prices, starts and completions. <\/p>\n
After tinkering with attempts to revive the property sector, China has signaled it\u2019s pivoting to a new model of development, away from the emphasis on debt-fueled investment.<\/p>\n
\u201cThis marks the virtual abandonment of an industry that once accounted for about\u00a0one-quarter\u00a0of China\u2019s gross domestic product and roughly\u00a015%\u00a0of the nonfarm workforce,\u201d Jeremy Mark, an Atlantic Council scholar and former IMF official, wrote on Wednesday<\/a>.<\/p>\n Many other economic problems\u2014such as weak retail spending, deflation, as well as low consumer and business confidence\u2014can be traced back to the free-fall in real estate, which is the main repository of life savings for hundreds of millions of households, he pointed out. <\/p>\n That\u2019s as an estimated 85% of the price gains in real estate have been wiped out since 2021. As result, consumers hoard their money instead of spending it, forcing businesses to trim wages, staff and prices to remain afloat. In response, consumers pull back further.<\/p>\n This feedback loop has kept consumer prices flat and producer prices in negative territory. China\u2019s overcapacity<\/a>\u00a0and its support for manufacturers over consumers have also stoked excess supply that drags down prices. An economy-wide price gauge shows China has been suffering from deflation for three straight years, the longest such streak since its transition to a market economy in the late 1970s.<\/p>\n The real estate crash is also rippling through China\u2019s banks and local governments, as efforts to stave off more bankruptcies among developers have created \u201czombie\u201d firms and mountains of debt, Mark warned.<\/p>\n \u201cEven if the shockwaves from China\u2019s collapsed property bubble eventually recede, the task of rebuilding will be daunting,\u201d he added. \u201cIt requires not only replacing a major pillar of Chinese economic dynamism, but also the revitalization of homeowners\u2019 deeply damaged sense of financial security.\u201d<\/p>\n Export-led growth running out of room<\/p>\n Economists have long urged China to rebalance its growth to a consumer-led model and away from an export- and investment-led model. President Xi Jinping\u2019s industrial policies have even been flagged as a greater threat to the global economy<\/a> than Trump\u2019s trade war.<\/p>\n But last year\u2019s reliance on exports showed that the country\u2019s leadership remains reluctant to make the switch. While Chinese businesses have flexed their muscle as global manufacturing powerhouses, their ability to prop up the rest of the economy is in doubt.<\/p>\n \u201cChina\u2019s growth model is becoming increasingly difficult to sustain,\u201d Cornell professor Eswar Prasad wrote in a Financial Times op-ed<\/a> in December.<\/p>\n Weak growth in employment and wages, plus the property crash and lack of confidence in the government, have weighed on consumption, he added. With little domestic demand, the only option for China\u2019s factories is to export their output.<\/p>\n But Trump\u2019s tariffs have forced exporters to look elsewhere, creating a backlash in other markets that could put up additional trade barriers and limit future growth, Prasad said.<\/p>\n The EU and some other large economies like Indonesia and India have already imposed some targeted tariffs on certain Chinese goods.<\/p>\n \u201cAs the second-largest economy in the world, China is simply too big to generate much growth from exports, and continuing to depend on export-led growth risks furthering global trade tensions,\u201d IMF Managing Director Kristalina Georgieva\u00a0warned<\/a> in December.<\/p>\n","protected":false},"excerpt":{"rendered":"The flood of Chinese exports around the world helped the economy blow past President Donald Trump\u2019s massive tariff…\n","protected":false},"author":2,"featured_media":269178,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[114,1657,3472,85,46,12981],"class_list":{"0":"post-269177","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-business","9":"tag-china","10":"tag-exports","11":"tag-il","12":"tag-israel","13":"tag-tariffs-and-trade"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/269177","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=269177"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/269177\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/269178"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=269177"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=269177"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=269177"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}