Is China Failing In Its Effort To Reignite Its Economy?

It is difficult to ignore China's is failing in its effort to reignite its economy. Proof is pouring out of China that its problems go far deeper than most people ever imagined. China is in a period of economic contraction. The era of large-scale concentrated consumption may be over. Following the pandemic and lockdown unemployment is soaring. Simply put, the country seems to be entering into a post-Japan bubble era or even worse a situation similar to what America faced in the great depression.

Sun Liping a professor in the Department of Sociology at Tsinghua University and a doctoral supervisor in economics revealed the reason for China's malaise. The authorities' important resources are all concentrated on infrastructure, and high technology, including the advanced manufacturing industry to solve the "bottleneck." China's focus is on the military industry, government financing platforms, etc. While the number of people employed in these areas is decreasing.

This means the rest of the population is getting less support and people are struggling to survive. Add to this the collapse of the housing bubble and you have a disaster. The fact that most of the wealth of Chinese households was held in housing equity and prices are falling has created a reverse wealth effect. This has caused consumer spending to grind to a halt, Many Chinese homeowners are now upside-down on their investments and owe more than the property they bought is worth.   

China Observer has released a video claiming that the latest annual reports of Shanghai’s three long-standing department store companies - Jiubai, Xujiahui, and New World are grim. All these chains have experienced a significant decline in their sales. Shanghai Jiubai's revenue fell by 30.51% year-on-year, and the net profit attributable to the parent company fell by 48.95%. Xujiahui's revenue fell by 22.33% year-on-year, and its net profit attributable fell by 76.30%. New World's revenue in 2022 fell by 27.07% year-on-year, and its net profit attributable to the parent company fell by a staggering 174.90%. 

A survey conducted by the Industrial Research Center of the Beijing-based "Finance and Economics" magazine, in 2022, gave credence to why we should believe these numbers over some of the numbers being issued by the Chinese Communist Party (CCP). It indicates that over 1.94 million companies were deregistered in China's 40 wealthiest cities, accounting for approximately 7% of the total. These 40 cities have a permanent population of 427 million, approximately 30% of the nation's total population.

The original title for this piece was, ' Does China Have Six Million Buildings?' China Insights reports that the Ministry of Housing and Construction announced that there were nearly 600 million residential buildings in China. This shocked the public. That is 600 million buildings, not 600 million homes. That is just over one building for every two people in China and one building contains multiple homes that usually accommodate 3-4 people or more. 

This highlights the overbuilding and bundling of local finance in the real estate sector. It is a problem the CCP will not easily address. It has been estimated the housing sector has become so oversized that in recent years it accounts for 25% or more of China's GDP. Far too much of China's wealth has been placed into poorly built empty housing. for more on this subject see, https://brucewilds.blogspot.com/2021/10/china-housing-market-is-on-life-support.html

Supply chain issues have also created another problem for China. The big move away from companies producing goods in China means China is losing its position as the world's factory. Several other countries such as Vietnam and Mexico are rapidly pulling jobs away from China and it shows.  All of the above factors create a real challenge for the CCP. 

Today, many governments are heavily engaged in propaganda. They even pay people to post positive stories supporting their narratives. China excels in this making it extremely difficult to know what to believe. While positive stories continue to flow out of China, it is important to ask what is real and what is CCP paid for propaganda. I'm under the impression this post represents the true picture of China better than most.

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)