Consumer confidence in China has been eroded as a result of the country’s drastic measures to control the coronavirus this summer, which is fuelling worries about the sustainability of the world’s second-biggest economy.
According to official data published Wednesday, retail sales suffered in August, rising by just 2.5 percent when compared to the same month the previous year. That was much lower than anticipated, and it represented a significant deceleration from the 8.5 percent increase reported in July.
The Delta Version Has A Significant Impact On The Chinese Economy
Officials in China blamed the slower growth on Covid-19 outbreaks and flooding, which prevented people from traveling and prompted them to postpone their “summer holiday expenditure,” as according to Fu Linghui, a spokesperson for the National Institute of Statistics, who spoke at a press conference in Beijing on Wednesday.
Industrial output increased 5.3 percent in August compared to the same month the previous year, which was also the slowest rise in July as well as the weakest growth produced by China’s manufacturers in a year.
Investments in urban areas, on the other hand, rose by 8.9 percent from January to August, a decrease from the 10.3 percent recorded in the first seven months of the year.
The new statistics published on Wednesday provide the most comprehensive picture yet of the economic toll that the government’s efforts to halt an epidemic of the Delta strain this summer have had on the economy.
In order to prevent the spread of new infections, China has implemented an aggressive zero-Covid policy, which has resulted in the closure of cities, the cancellation of flights, and the suspension of certain port activities. The strategy was successful in bringing the virus under control, but it did so at the cost of economic activity.
However, the Chinese economy is also dealing with a number of other issues, one of which is a liquidity crisis in the real estate industry. According to floor area, the number of new housing projects dropped by 3.2 percent during the first 8 months of the year.
The firm, which is one of China’s biggest property developers, has already caused financial turbulence in the nation, as the value of its bonds and equities have plummeted in recent weeks.
In addition to the potential for civil upheaval, investors are concerned that a default would have negative consequences for China’s financial system and the broader economy.
Already, investors and Evergrande’s own workers are allegedly demonstrating outside the company’s offices in Shenzhen, as well as in the provinces of Sichuan, Jilin, and Henan, according to media reports.
Meanwhile, the coronavirus may continue to be a source of concern for the economy. The epidemic in southern Fujian province “is presenting a negative risk to our estimate of a recovery in GDP” in the fourth quarter, after the country had a poor third quarter, according to Louis Kuijs, director of Asia economics at Oxford Economics, in a research paper released on Wednesday.
According to him, “the restrictive attitude on lending to property developers will continue, and the regulation tightening on internet businesses will impact on mood and growth,” alluding to the current government crackdown on major technology companies.
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