The narrative on China’s slow growth is grossly exaggerated

China’s slowdown is bad news for the global economy. Rapidly growing China imports key goods, manufactured goods and services not only from the rich world but also from many developing countries in Africa, Latin America and Oceania, increasing prosperity there. In 2022, China’s merchandise exports are expected to be worth $3,504.9 billion, more than India’s GDP. And it imported goods worth 2.674.7 billion. And these economies from where China imports goods and services, pumped up with those export earnings, import more than the rest of the world, including India.

Deflated China growth will reduce Chinese imports from economies that are also export destinations for India. India’s GDP growth has been affected by lower net exports, the difference between exports and imports, which, when added to consumption and investment, produce the economy’s total output.

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And why was China’s growth performance so weak? The primary reason, of course, was the Zero Covid policy, which led to unpredictable and prolonged lockdowns of entire towns and cities, leading to major disruptions in production. Now, with these lockdowns becoming history, Beijing has abandoned its zero Covid strategy.

A crackdown on China’s highly leveraged property market has contributed to the growth slowdown. These were unpleasantly familiar to property buyers in India, taking money from customers in advance, and using the money to start new projects, rather than the customers they had signed up for.

In China’s typical structure of multi-tier governance, the sale of land to property developers has become a major source of revenue for local governments. These encourage reckless expansion of real estate development. Instead of giving property companies time to reduce their leverage, the Chinese government imposed harsh limits on their ability to tap credit. The sudden loss of liquidity forced many large property developers to sell their assets, driving down property values, triggering fresh margin demands from lenders, adding to liquidity pressure and a downward spiral in the property segment.

The government has taken steps to ease the sector’s liquidity crunch, but it will take time for assets to emerge from the mess. And, given the new, notable trend of population decline in China, some of the anticipated real estate demand is unlikely to materialize. This will do the magic of capital write-off.

Another factor was the Chinese Communist leadership’s decision to rein in the country’s tech giants, who had begun to show distinct signs of increasing shoe sizes deemed appropriate by the party for these types. In late October 2020, just as Ant Financial was heading for the world’s largest initial public offering valued at $34 billion, China’s financial regulators placed restrictions on the operations and lending limits of non-bank lenders, In which the ant will take a few years. At least, to comply. This pulled the rug out from under the ant’s feet, possibly all six of them.

Jack Ma, the founder of Ali Baba, which created its subsidiary Ant for finance transactions on its online marketplace, has given up his position as Ali Baba’s chairman and fled to Tokyo.

Other tech companies felt the effects of the tech crackdown. China restricted access to the videogaming industry for children, limiting the number of games a child could play in a week. It also prohibited certain types of games, particularly those depicting heroes with androgynous appearance, as the Chinese government suspected the normalization of suboptimal hypermasculine heroes to be the cause of China’s declining fertility rate. The tech sector lost market value, revenue and jobs.

Another reason for the slow growth is the weak export performance. This is what the World Bank has to say about the slowdown in China’s exports: “The growth rate of G-7 countries, China’s main trading partners, declined from 4.1 to 1.8 percent y/y during the first three quarters of 2022, impacting China It was lying export performance. China’s export growth in US dollar terms continued to decelerate and contracted by 0.3 per cent y/y in October despite higher export prices in US dollar terms. Nevertheless, for the full year, China’s merchandise exports grew by a little over 10% in 2022.”

And despite all this, China managed to grow by 3%.

It is important to understand how much additional output and income is generated by China from its 2021 GDP growth of 3%, in current US dollars, $17.7 trillion. It added $533.7 billion to its own and world output.

To match China’s performance, the Indian economy will need to grow its 2021 GDP by 16.8% from the current US$3.176 trillion, according to World Bank data. This is because the Chinese economy is 5.6 times bigger than India’s. China’s ‘slow’ growth will add half a trillion dollars to world output in 2022 and set the stage for faster growth in 2023.

When asked about the implications of the French Revolution for the world, Mao Zedong replied, It is said that it is too early to say. What can we say at this early stage of the implications of slower growth in 2022 for China’s prospects in 2023? This means growth this year could be spectacular, especially given the low base as economic activity slumps in 2022, with the World Bank’s figure of 4.3% and even Morgan Stanley’s expectation of 5.7%. more than.

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