China's downturn gets more serious
Money Magazine Australia|October 2023
While the country's construction sector may be 'sick', other parts of the economy are getting on with business
Annette Sampson
China's downturn gets more serious

THE STATE OF PLAY

The world’s second biggest economy, and Australia’s major trading partner, has been copping a lot of bad press in recent months. A Chinese downturn seems to be on everyone’s playlist, with the potential to destabilise the already shaky global economy.

BUT HOW BAD ARE THINGS REALLY?

There is no doubt China has problems. After a spurt of growth earlier in the year as it came out of its extended Covid lockdown, the Chinese economy has stalled and is unlikely to meet its official growth projection of around 5%.

Consumer prices are falling, exports were down almost 15% in the year to July, there is talk of foreign companies relocating production from China, and youth unemployment has risen so much that the government stopped publishing official figures in July, after it topped 21%.

Equally concerning are the problems being experienced by some of the country’s largest property developers and the large amounts of debt carried by local government. Construction of residential apartments is at its lowest levels in around 20 years.

“It’s a big part of the economy, and it’s very sick at the moment,” is how Platinum Asset Management’s co-chief investment officer, Andrew Clifford, put it recently.

While much of the rest of the world is trying to curb inflation, China is looking at deflation and comparisons are being made to Japan in the 1980s.

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