Urgent need for much more stimulus from Beijing
The urgency for further, robust stimulus measures from Beijing has never been more pronounced.
Contrary to the high inflation plaguing the US and Europe, China faces a disconcertingly low inflation rate, with the Consumer Price Index (CPI) showing a mere 0.3% increase year-on-year. This tepid growth signals a persistent deflationary threat that could undermine economic stability if not addressed promptly.
A significant factor exacerbating China’s economic woes is the ongoing crisis in its real estate sector. Once a powerful growth engine, the sector is still beset by high debt levels among property developers, leading to a sharp contraction in construction activities.
Prices of new homes in China suffered their biggest fall in nearly a decade last month, in a sign that Beijing’s “historic” real estate rescue has not yet had the desired effect.
This slowdown has had, and continues to have, far-reaching implications, curtailing investment, increasing unemployment and eroding consumer confidence.
Property investment for the first five months of the year dropped 10.1% from a year ago, according to China’s National Bureau of Statistics in June. New property sales fell 28% during the same period.
The housing market’s instability threatens to further spill over into other areas of the economy, making it imperative for Beijing to intervene with targeted and more robust support measures.
Another pressing issue is the weakness in domestic demand. Despite various efforts to stimulate spending, Chinese consumers remain cautious and household consumption has not bounced back to pre-crisis levels.
This sluggish demand is a significant drag on economic growth and underscores the need for policies that can boost consumer confidence