China’s economy faces long road to full recoveryーNHK WORLD-JAPAN NEWS
It’s been a couple of years since China’s economy lost steam and it still hasn’t bounced back. Yugo Fushima from our business desk is here to look into what the latest data are telling us about what’s happening with China’s economy right now. Yugo, right. Well, as you indicated, the economy has not been doing well and companies across the board are struggling. At the beginning of the month, we found out how managers are feeling. Now, this is called the purchasing managers index or PMI. Many managers in the manufacturing sector see business as pretty bleak. Any figure below 50 points to an economic contraction. The November index for this group was 49.2 below 50 for the eighth straight month. New orders for these firms were slow even as the US cut back some of its tariffs on Chinese imports. The survey covered 3,200 manufacturers. The readings for large, midsize, and small companies all came in below 50. The service sector seemed to be doing a bit better, but not great. Its index was at 49.5. It was the first time the figure for non-manufacturers fell below 50 since December 2022 in the midst of the pandemic. I talked to a prominent China economist about how she sees the current state of affairs. Tamay Yoshino says the votes in various sectors all stem from a weak property market which has been soft since 2020. She says it still hasn’t bottomed out. The amount of floor space sold in October was half what it was in the same period in 2021. We calculated how much unsold housing there was compared to how much was actually sold each year. In September, there was five times more in stock than that sold. That means it’ll take at least two years for the market to get back to where it was before the bubble burst in 2019. Tamay notes that the government has rolled out various measures to get the property sector moving. Some have included local governments buying up unsold apartments and converting them into housing for lowincome families. Local governments have also been supporting property developers financially so they can finish their projects and hand the apartments over to buyers who have already paid for them. But Kamay says these initiatives are progressing slowly because local governments are in charge. Local governments sell the rights to use the land to housing developers. The money they get from selling land or from usage rights along with taxes from the sector make up about 30% of the government’s finances. If the property market isn’t doing well, coffers come under strain and the authorities can’t actively press ahead with measures like buying up housing from developers. Tamay says there are some similarities to when Japan’s bubble burst in the early 1990s, but there are important differences, too. In Japan, the collapse of the property bubble led to the collapse of financial institutions, which in turn led to a prolonged economic slowdown. But in China at the moment, we are not seeing the downturn in the property market triggering a shakeup in the whole financial system. The ratio of bad debt held by banks is only about 1%. She also points to how the situation among households is quite different between Japan and China. Per capita GDP in China right now is about $13,000. When the bubble burst in Japan, the income level was already pretty high, around 30 to $40,000 per person. That means about three times that of China now. So, we can say China still has room to grow. Tamay says there’s much unmet demand in China’s economy, especially in rural areas where living standards can improve. She says it’s going to be up to the government to come up with policies to channel that demand in ways that get the economy moving again.
China’s weak property market continues to weigh on the broader economy, and it could take years to turn things around.
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