By Christophe Vogt in Geneva, Switzerland
Concerns about China’s economic troubles are being exaggerated and Beijing still has plenty of fiscal headroom, the United Nations’s trade and development chief said Wednesday.
China’s ballooning property-sector crisis has seen several high-profile firms engulfed in debt, fuelling fears about the country’s wider economy and a possible spillover globally.
“We don’t share the very pessimistic projections about China,” said Rebeca Grynspan, head of the UN Conference on Trade and Development.
UNCTAD lowered its 2024 China growth estimates from five percent to 4.8 percent, citing weak domestic demand.
“It’s a slowdown but it’s not something like the very pessimistic reviews that we have seen in some of the publications,” Grynspan told a press conference for UNCTAD’s flagship annual economic forecasts.
“We think that there is a slowdown of growth in China, but not a dramatic crisis.”
Grynspan, a former vice president of Costa Rica, added that China “has a lot of fiscal space, unlike other countries”, so Beijing still has the means in hand “to be able to rebound and to support the economy”.
China’s property sector has long been a pillar of growth — along with construction it accounts for about a quarter of GDP — and it experienced a dazzling boom in recent decades.
But the massive debt accrued by its biggest players has been seen by Beijing as an unacceptable risk for China’s financial system and overall economic health.
Authorities have gradually tightened developers’ access to credit since 2020, and a wave of defaults has followed — notably that of property giant Evergrande.
Richard Kozul-Wright, the director of UNCTAD’s Globalisation and Development Strategies division, was even more critical of the prevailing pessimism than Grynspan.
“You could have expected a faster recovery in China this year, and that hasn’t happened because of a number of strong headwinds in the real estate market,” he said.
Furthermore, consumer demand in China has been much weaker than expected, Kozul-Wright added.
“But we certainly don’t agree with the almost hysterical reaction some of the Western press has adopted towards China.”
China eclipsing eurozone growth
UNCTAD’s report forecasts that China will grow 10 to 12 times faster than the eurozone this year, and “it continues to be a major contributor to global growth”, Kozul-Wright said.
In addition to the slowdown linked to weak domestic demand, China’s economic partners are also worried about upheavals shaking the property sector, which seems to many analysts to be reaching the limits of its economic model.
Chinese policymakers have come under intense pressure in recent months to unveil measures to support the property sector.
However, they are not keen on the type of bonanza unveiled in 2008 during the global financial crisis, meaning the government could struggle to hit its growth target of around five percent for this year.
Kozul-Wright said there were problems that China’s policymakers would have to address, because the five percent target “will be difficult to reach, unless they do employ fiscal instruments to boost growth”.
“So there are challenges — but not of the order of magnitude that we often read in the Western press.”
In its report, UNCTAD said world economic growth was projected to slow from three percent last year to 2.4 percent in 2023, with few signs of a rebound next year.
Institutional reforms of the global financial architecture, more pragmatic policies to tackle inflation, inequality and sovereign debt as well as stronger oversight of key markets are needed, it said.
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