‘Dangerous’: fear for Chinese economy

A chilling warning has been issued that China is no longer interested in getting “rich” with a new strategy that will also affect Australia.

China has taken a shocking move – completely in the opposite direction to other major countries like Australia and the US – as it cut interest rates amid fears of the brutal impact its Covid zero strategy is having on its economy.

It was forced to cut its interest rate by 0.2 percent to 4.4 percent for first-time homebuyers in an effort to stem a slump in mortgage lending, which hit its lowest level in four years, despite the real estate market being much supportive. offered of its economy.

New home sales fell to 39 percent in April, while sales by value fell a staggering 46.6 percent.

Meanwhile, the US Federal Reserve raised interest rates with the largest increase in 22 years, by half a percentage point earlier this month to a range of 0.75 percent to 1 percent, while Australians also experienced their first rate hike in 11 years. in May.

Chinese retail sales also fell 11.1 percent in April as Shanghai and 40 other cities were sent into lockdown to try to contain the Covid outbreaks as manufacturers struggled to resume normal operations, leaving production fell by 2.9 percent.

Experts are now questioning whether China can meet its annual growth forecast as Chinese President Xi Jinping appears to be pursuing Covid-zero at all costs, with some warning that it will never return to pre-pandemic levels.

This could have a sobering effect on Australia’s top exports, including iron ore, which brought in $149 billion for the economy last year.

Michael Shoebridge, director of defence, strategy and national security at the Australian Institute of Strategic Policy, said April economic data released by the Chinese government shows a clear domestic slowdown, including in manufacturing that will affect the economy. export.

“These economic problems will continue as Xi Jinping maintains his Covid Zero strategy, which appears very likely until sometime after November, when he plans to get a term extension as the leader of the Chinese Communist Party (CCP) he said. news.com.au.

“Even after that, the Chinese economy is on a very different track than it was five years ago. Beijing’s priority now isn’t to get rich and grow global markets, it’s to increasingly cut off China from what the CCP sees as dangerous foreign influence, double party control and reduce China’s dependence on the democratic world. .

“It all adds up to China growing less than the government’s optimistic 5.5 percent target this year and beyond.”

ANZ has forecast China’s economy to grow by 5 percent this year, but has cut its 2023 forecasts to 4.2 percent from 5.1 percent, amid concerns about how Mr Xi will behave when it comes to stimulus once he leaves the country. has been reinstated as president for a third term.

“We are pessimistic about China’s medium-term outlook. The authorities are expected to phase out their support measures next year. This coincides with an uncertain global outlook where growth in the US is likely to slow,” ANZ’s chief economist for Greater China, Raymond Yeung, said. Bloomberg

Mr Yeung also warned that while China has been competitive in manufacturing, “many multinational companies are likely to reassess the level of operational risk in China,” given Mr Xi’s concerns about foreign interference.

“Access to foreign technology and business know-how will become increasingly difficult,” he added.

World events also caused a stir and it was a warning to Australia, Mr Shoebridge added.

“Putin’s war, Covid and Xi’s shutdown of China are contributing to a low-growth world,” he said. “Australia’s trade diversification into partners we can trust is making more and more sense.”

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