China’s hopes for a swift post-COVID economic recovery have been dampened by weak external demand, according to a report by Channel News Asia. Although the country experienced positive annual growth in March and April, economists warn that these figures are not the full picture. The comparison is made from a low base when Shanghai was under lockdown in 2022.
One of the main factors affecting China’s recovery is the intention of companies to diversify their supply chains away from the country. Trade tensions between the US and China have also raised concerns among businesses. Christian Roeloffs, founder of online logistics platform Container xChange, has observed a significant number of excess containers at Chinese ports. He says that politics and ongoing production restrictions can deter him from choosing China as a reliable alternative.
China is facing challenges as it tries to move past the COVID-19 pandemic. Month-on-month export growth has been slowing down, and according to ING Bank, there is no growth expected for China’s exports in 2023. This weak demand for goods is impacting the Chinese domestic economy, despite authorities’ efforts to boost domestic spending.
As a result, companies are looking to grow their business abroad once again. Tenglong Automobile, a vehicle manufacturer, hopes to make up for lost time after two years of dampened overseas sales due to the pandemic. Tenglong Automobile expects its orders from abroad to triple this year compared to 2022. Meanwhile, GEMAC Engineering Machinery, a general manager, notes that their business is mainly domestic for now.
In addition to these economic challenges, China is also facing a mounting debt crisis at home. The country has lent nearly $1 trillion to developing countries, and now it is reluctant to cancel the large debts owed by these struggling nations. China’s own debt, including that of local governments and real estate developers, is a major concern. Overall debt within China has reached 282% of the country’s annual economic output, making it harder to manage.
The accumulation of debt in China has been rapid compared to other countries, posing a unique challenge. Despite the relatively small proportion of China’s lending to developing countries, the sensitivity of these loans is high due to political reasons. Some individuals on Chinese social media argue that the banks should have lent money to poor households and regions within China instead.
Overall, China’s hopes for a quick economic recovery have been dampened by weak external demand and the challenges it faces both domestically and in terms of its debt. While the country aims to increase domestic spending, the reduction in imports suggests this may not be happening as quickly as desired. As companies look to grow their business abroad once again, the future of China’s post-COVID recovery remains uncertain.
