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APS Radio News — A number of analysts seem to be saying that China’s economy is entering a condition from which it might not recover anytime soon. economy news
Whereas during previous downturns China had lower levels of debt, because debt is now about 300% of GDP, they say that China will have less wherewithal to engage in additional levels of spending.
According to observers, China’s infrastructure has built to such a degree that there is not much more it can add in the form of highways, airports, high speed rail and the like.
Another drag on China’s economy appears to be that of the housing market, as many apartments remain unoccupied.
Recent difficulties of a number of property trusts, including , have cast doubt on its property market.
Trusts invest in the construction of various types of property; as well, trusts invest in other types of companies.
One of those trusts, Zhongrong, missed a number of complete payments to companies that have been invested in the trust.
For its part, Zhongrong has been a major shareholder in several property projects, according to ANS.
In the context of the real estate market, fewer people are purchasing apartments and houses.
In turn, a faltering housing market has affected companies like China Evergrande, which, a few years ago, had defaulted on $300 billion in debt.
Another company affected by a downturn in the market has been Country Garden, which is anticipating a loss of several billions of dollars, ANS recently reported.
So far this year, Country Garden has seen a drop in its net income by about $900 million.
As well, ANS reports that home sales in China’s largest markets fell bay almost one third, compared to the same period a year earlier.
With regard to the period of 2008 to 2022, China’s investments in infrasstructure–railways, airports, highways and the like–amounted to almost 45%, compared to the world average of 25%.
Another metric economists examine is that of a country’s level of productivity.
According to economists, China’s level of productivity has declined from a high of about 5% per year in the late 1980’s to about 1.5% in recent years.
Whereas China now must invest about $9 to get $1 growth in GDP, in 2013, China had to spend about $5 to get $1 growth in GDP.
From 2008 until a few years ago, China’s level of productivity contributed to about one third of its GDP growth, according to ANS.
In sum, analysts maintain that China’s spending and investing are yielding diminishing returns.
A number of observers, a number over the years, have recommended that China shift more of its spending from investments in infrastructure to those that will stimulate greater levels of consumer spending.
For example, according to ANS, in China, personal conumption appears to represent about 39% of GDP, whereas in the US personal consumption represents about 67%.
They say that China technially is still a middle income country, as its income per person is nearly $13,000, whereas, in the US, income per person is $75,000.
A number of institutions, like the International Monetary Fund, estimate that China’s yearly GDP growth is about 4%.
Over a decade ago, its annual growth of GDP was nearly 10%.
At the time, economists and observers said that if China’s GDP went below 9%, youth unemployment would increase.
As it is, China’s labor force appears to be shrinking, as its population is aging and as its birth rate had declined to little over 1%.
Analysts say that its birth rate must be about 2% in order to stabilize population numbers.
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