China is likely to see a trade deficit in 2023, dragging down GDP growth and depressing profits and employment in the manufacturing sector, The Hong Kong Post reported, adding that there is a clear message that markets should not be too optimistic about Chinese growth this year, according to comments seen on the Chinese microblogging website Sina Weibo.
After the end of China’s ‘Zero Covid’ policy in December 2022, there were hopes for economic recovery in China, the report said, adding that deteriorating confidence of households, coupled with the unresolved difficulties in the housing sector, weighed on the country’s growth rebound.
According to preliminary economic data in February, overall growth in China is not yet roaring back. Turnover in freight transport is still down from a year ago.
The country’s home sales remained below last year’s levels. New home sales were dragged down by falling sales in mid-sized cities. The unemployment rate is still high which keeps household confidence weak.
Amid the current crisis, some banks in the country are resorting to drastic measures, including allowing people to pay off mortgages until they are 95 years old.
Some banks in the cities of Nanning, Hangzhou, Ningbo and Beijing have extended the upper age limit on mortgages to between 80 and 95. People aged 70 can now take out loans with maturities of between 10 and 25 years, according to The Hong Kong Post.
A branch of the Bank of Communications in Beijing has allowed borrowers as old as 70 to take out home loans lasting 25 years, which means the upper age limit on its mortgages has been lifted to 95.
According to The Hong Kong Post, the Chinese economy will in the medium-to-long term, move into a downward spiral due to demographic headwinds and declining productivity.
The International Monetary Fund (IMF), although expecting China’s economy to rebound in the short term, revised its medium-term growth forecast on February 3, with the GDP growth forecast being lowered to 3.8 per cent in 2027, compared to its previous projection of 4.6 per cent.
The Asian Development Bank (ADB) in its report published in December 2022, made a longer-term forecast predicting a gradual decline in China’s economic growth from an average of 5.3 per cent in 2020-25 to an average of two per cent in 2036-40.
The Singapore Post recently reported that data about China’s growth and the image the country is trying to portray on the international forums are contrary. On one hand, the data on employment and GDP point towards a crisis. But Chinese authorities are still trying to put up a positive image on international forums.
The report said China’s economic growth fell from 3.9 per cent in the third quarter to just 2.9 per cent in the final quarter.
As a result of this, China’s annual growth rate was a mere 2.2 per cent in 2022. This was the second lowest since 1976 and 2020 when China was suffering from Covid’s economic dip.