China’s economic rebound from its Covid years is facing increasing scrutiny as the country prepares for an “appropriately loose” monetary policy next year, its first in 14 years. Beijing aims to boost economic growth to 7% or higher, a goal that could ensure the security of its rule at home and project power abroad.
The move comes amid concerns about high youth unemployment, which has sparked public protests and raised questions about the government’s ability to maintain control. Unemployment among young people reached a record 21.3% in June 2023, prompting China to stop publishing the data.
Internationally, US-China trade tensions are also a major concern. The Phase 1 deal is likely to be renegotiated with higher tariffs, potentially raising average rates to 22%. Chinese exporters have been managing for a 30-45% increase, but experts warn that Beijing may not be enough to address underlying economic issues.
China’s fiscal policy changes will focus on preventing local authorities from accumulating massive land-tied deals deficits. The government is considering a $12 billion credit line for the automotive industry and softer loans in the construction sector to prevent loan defaults. However, these measures may not be sufficient to address the underlying problems.
The real challenge lies in the personal impact of economic issues on the population. With property defaults, bad loans, and rising unemployment, China’s official reported figure of $19.2 trillion for household saving appears misleading, with actual savings around 31% lower. Experts warn that these macroeconomic factors pose a significant threat to the government’s ability to implement reforms.
As Beijing prepares to take bold action to boost economic growth, the country faces increasing uncertainty and challenges in maintaining control.
Source: https://oilprice.com/Energy/Energy-General/Chinas-Push-for-7-Growth-Faces-Big-Challenges.html