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China’s Manufacturing Sector Unexpectedly Contracts Amid Weak Demand, Covid Lockdowns
China's manufacturing sector contracts in June with the PMI index dropping below 50 - to 49.0. Exports were also coming in lower. Experts say the increase in interest rates by the US is reducing imports of Chinese goods into the US. This comes as local governments are strained in their finances by $900 billion, and a budding revolt is taking place from property buyers with developers in financial trouble, as reported in the WSJ. Psychological hurdles now loom in the loss of confidence in the public in the property sector, loss of confidence of foreign investors with many constraints in operating, mental health issues for the population in many cities with the covid lockdowns.
The growth has slowed to 0.4% and there is now a realization dawning that there was overdependence both on property sector and foreign investment that set up new factories offshored from the US and Europe that alienated the public in these countries. Unlike wih the situation of Japan in the sixties and seventies for modernizing its economy growth of the scale China was pushed into by misguided and self interested business interests in the US including its investment banks and local government officials in China without restraint by the central government in Beijing, ultimately led to trade friction and permanent damage to US China friendly relations. Communities in the US and the EU simply could not cope with the hyper growth from hyper shift of factories from the home countries to China that pushed this hyper growth. The property sector played the same role in the domestic front with too big a burden carried by it resulting in hyper growth. This did not have to happen. It happened because of a lack of understanding that this would have consequences in the longer run which is now showing up.
Unintended consequences of China's years of hyper growth- climate change and sharply slowing growth
07/31/2022
China's overdependence on the property sector and foreign investment in offshoring factories from home countries to China had unintended effects. The property sector led growth has led to sudden collapse with local governments finances strained by $900 billion according to WSJ and loss of buyer confidence. The effects on communities in the US and EU of shifting local factories to China is well known having alienated the US and EU public, and permanently damaging friendly relations leading to its reversal and shift back to home countries. Years of unbridled hyper growth has not done well for China with the consequences seen today. At the start of this experiment China embarked on in 1990 China had little experience with market economy. The self interested advice of American investment banks and business and the zeal of local government officials led to hyper growth. The US and EU countries could not cope with the scale of China's hyper growth and shift of factories overseas as they had done with Japan in the sixties and seventies because of the sheer scale and compression in a short period for China. The result is sharply slowing growth in China and loss of faith on both sides. It did not have to happen this way and shows the unintended consequences of letting capitalism go its own way with interested parties acting excessively and governments not acting where prudence is needed. The burning of coal in unlimited quantities created the problems of climate change the world faces today- a double blow for the world and for China with lessons for today and how we think about his in future.
Grouped Articles
China’s Manufacturing Sector Unexpectedly Contracts Amid Weak Demand, Covid Lockdowns
WSJ 07/31/2022
China’s Economy Tested by Strained City Finances
WSJ 07/31/2022
China Home Sales Plunge in July, as Mortgage Revolt Deters Buyers
WSJ 07/31/2022
China property sales could plunge by one-third, analysts say, as crisis deepens
The Guardian 07/26/2022
China Bet It All on Real Estate. Now Its Economy Is Paying the Price.
NYTimes.com 10/16/2023
Years of hyper growth followed by slight or shrinking growth in China
07/31/2022
For years China pushed hyper growth without correctly understanding the sources of that hyper growth and its consequences in the long run. Communities in the US and the EU simply could not cope with the hyper shift of factories from local regions to China that created the hyper growth in China. Local governments in China and self interested investment banks in the US and Eu pushed for this growth and the central government failed to act with restraining action. The result is alienated public in the US and EU, intense trade and competitive frictions and permanent damage to friendly US China, US EU relations. The domestic side of this hyper growth was the overdependence on the property sector which was asked to carry a bigger burden for development leading to the crisis today with local governments strained for financing by $900 billion as reported in WSJ today July 31. 2022. This did not need to happen. China entered this experiment with capitalism without restraining action with very little knowledge of the market economy and how it operates correctly only with restraining and corrective action in the interests of the whole people of the country. Too much has gone wrong for peoples on either side, the unintended effects and consequences in the simple unbridled pursuit of self-interest alone.
Linked Articles
China’s Economy Tested by Strained City Finances
WSJ 07/31/2022
China’s Manufacturing Sector Unexpectedly Contracts Amid Weak Demand, Covid Lockdowns
WSJ 07/31/2022
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