China’s economy was one of the big winners coming out of the pandemic. China, using their methods, was able to contain the pandemic very quickly through mass lockdowns, and that opened the gates for a quick, smooth economic recovery. That’s been the trend for China’s economy in the past few years as they’ve accepted some parts of a capitalist economy although they are a Communist state, and that has allowed for rapid economic growth. It’s important to remember, though, that they are still a Communist country, and their roots in the party are still very deep in.
China has been placing reforms to rein in the economy and make it rely on the government in the last few months. The main goals were to lower household and corporate debt, make their economy more climate friendly, and regulate the tech industry. We saw a major environmental move with China placing heavy restrictions on the crypto industry, and the tech regulations have sent Chinese shares down the drain in the US stock market. With all of this, growth is slowing, and on Monday that was seen clearly as China’s economy grew at a rate of 4.9 percent, which blundered the expectations. Economic reform isn’t the only problem by a longshot; China is facing supply-chain bottlenecks like the United States, and coal prices are rising, which is slowing China’s manufacturing sector, which is a centerpiece of its economy. Unique problems have arrived too, the most notable one being the Evergrande scandal during this quarter. It sheds light on China’s real estate problems, and it’s up to the government to solve them. Economists believe that the Chinese government will relax some of these restrictions to allow more short-term economic growth as Xi’s re-election is coming up, but the long-term future seems a bit muddy. What do you think about China’s slowdown?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.