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China is Bracing for a Downturn That May Be More Severe Than 2020

Six months after China’s government established aggressive economic objectives for the year, growth has slowed so severely that some large banks no longer believe even 3% can be achieved. This is despite the fact that China’s government first set the optimistic targets.

Since March, when the official objective of around 5.5 percent was first published, there has been a consistent downward trend in growth estimates. According to the results of a study conducted by Bloomberg, the general belief is that the economy will grow by 3.5% this year, which would be the second-weakest annual figure in more than four decades. As we get closer to the end of the year, more and more concerns emerge, and economists at Morgan Stanley and Barclays are among those who are anticipating even weaker growth.

The economy is being roiled not just by China’s stringent Covid-19-zero policy of lockdowns and mass testing, but also by other factors as well. The collapse of the property market, drought, and sluggish demand both domestically and internationally have all combined to dampen growth.

Last Monday, the senior China economist for Barclays, Jian Chang, lowered her full-year GDP projection from 3.1 percent to 2.6 percent. She cited the “deeper and longer property slump, expanded Covid-19 lockdowns, and declining external demand” as the reasons for her decision.

According to what she said, the shortage of cash that developers are experiencing will continue until 2023, and low levels of trust in both the real estate market and the economy will prevent any major rebound in house sales.

The most significant threats to the economy are discussed in this article, along with what the most recent statistics and alternative indicators have to say about the prognosis for the remainder of the year.

The Covid-19-zero policy, which the government continues to be dedicated to enacting despite the fact that more contagious virus strains are making it more difficult than it has ever been to manage epidemics, is the largest drag on the economy. This year, the virus has spread to all ten provinces, and about 865 thousand individuals have been afflicted with it.