See More on Facebook

Business, Economics

Myth of China’s economic growth collapsing

The myth of growth in which auto and housing sales continue to support the economy has collapsed.

Written by

Updated: March 5, 2019

The National People’s Congress of China began Tuesday in Beijing. This year is a milestone, marking the 70th anniversary of the founding of the People’s Republic of China, and the economy is the main focus of attention at the NPC, China’s national legislature.

This article will explore the actual situation in the country.

‘Worst figure’

“We only sold 500 vehicles last year, and so incurred a loss of 800,000 yuan (about ¥13.2 million.) It’s the worst figure since we started operations,” said Zhu Dawei, a general manager of a sales outlet of U.S.-based automaker General Motors in Shenyang, Liaoning Province.

The outlet was empty without any customers.

“We sold 1,300 vehicles in the peak year of 2013,” Zhu lamented.

Chinese President Xi Jinping took office in 2013. In that year, the number of new cars sold throughout China increased by 13.8 percent from the previous year to 21.98 million units, surpassing 20 million for the first time.

The country’s gross domestic product grew by 7.8 percent, which exceeded the government’s target growth rate.

Xi advocated a draft plan for the huge economic zone concept “One Belt, One Road,” and encouraged Chinese companies to expand their business overseas.

In 2018, five years after Xi took office, the auto market was shaken significantly. The country’s new car sales declined by 2.8 percent year on year to 28.08 million units, falling below the previous year’s level for the first time in 28 years.

This was due to the end of a tax break on small cars, falling stock prices, and U.S.-China trade friction.

“The sluggish auto sales in 2018 are attributable to the government, which made light of the impact of the trade row with the United States,” a Chinese economist said.

The effects of the economic slowdown have extended to the real estate market.

Last autumn, high-rise condominiums built along a coast were put on sale in Xiamen, Fujian Province.

The price per square meter for a unit with two bedrooms and a living-dining room is 26,000 yuan (about ¥430,000). That is a reasonable price in Xiamen, where housing prices have remained high, but only a few people have visited there for the purpose of buying them.

Inventory piling up

“Actually, we’re selling the condominiums below cost,” a man in charge of the sales said. Explaining the reason for the low prices, he said, “Considering the construction costs, we want to sell units for 40,000 yuan (about ¥660,000) per square meter, but we can’t hold on to the inventory.”

In Xiamen, unsold homes have piled up to a value equivalent to total transactions for 18 months.

The housing market is deteriorating nationwide. According to Chinese media, the floor space of homes sold fell 9 percent year on year in Beijing in 2018, and 4 percent year on year in Shanghai in the same year.

The Xi administration stressed that houses are for living, not for speculation, and thus it restricted purchasing and reselling of homes for the purpose of speculation.

Some believe that the cooling of the housing market is due to the government’s strong stance.

‘Gray rhino’

Not only are major industries such as the auto and real estate industries suffering from poor performance, the rapidly growing information technology industry also has begun corporate downsizing.

If the economic and employment situations are destabilized, it will lead to growing social concerns, which would undermine the foundation of the Chinese Communist Party-led government.

In January, Xi called for top-ranking officials at the central and local governments to keep highly vigilant against domestic and foreign economic risks, saying they would need to prevent not only “black swans” but also “gray rhinos.”

A black swan is an event — such as the financial crisis triggered by the collapse of Lehman Brothers in 2008 — that is rare but has great impact on the market if it occurs.

A gray rhino is an issue that is highly likely but tends to be underestimated, such as debt issues. Though Xi usually does not use such economic terms, he used them to get senior officials fired up about the economic risks, which indicates that his administration has become increasingly alarmed.

Chinese Premier Li Keqiang denied the possibility of adopting pork-barrel policies. However, if the situation worsens further, China could make a policy shift, like the 4-trillion-yuan economic package it adopted after the collapse of Lehman Brothers.

With the Chinese economy facing an unprecedented crisis, dark clouds are looming over China as enters the milestone year marking the 70th anniversary of its founding.

Enjoyed this story? Share it.

The Japan News
About the Author: The Japan News is published by The Yomiuri Shimbun, which boasts the largest circulation in the world.

Eastern Briefings

All you need to know about Asia

Our Eastern Briefings Newsletter presents curated stories from 22 Asian newspapers from South, Southeast and Northeast Asia.

Sign up and stay updated with the latest news.

By providing us with your email address, you agree to our Privacy Policy and Terms of Service.

View Today's Newsletter Here

Business, Economics

More changes friendly to foreign investors on way in China

China is courting more FDI as their cash reserves run lower. China will roll out more measures friendly to foreign investors, including further removing business restrictions and leveling the playing field for foreign businesses, to foster a more enabling business environment and attract overseas investment. The decision was made on Wednesday at a State Council executive meeting chaired by Premier Li Keqiang. Meeting participants decided to open up more areas. Restrictive measures outside the national and FTZ negative lists on foreign investors’ market access will be consolidated. Restrictions will be lifted on the business scope for those foreign-invested banks, securities companies and fund management firms that are already operating in China. Policies on foreign investment in the automobile industry will be refined, including giving equal treatment in market access to domestic and foreig

By China Daily
October 18, 2019

Business, Economics

Malaysia’s PM Mahathir says rail line RTS linking Johor Baru to Singapore to proceed

The rail line has been on again and off again. Prime Minister Mahathir Mohamad on Thursday (Oct 17) said Malaysia will proceed with the 4km Johor Baru to Singapore rail line. His comments about the Rapid Transit System (RTS) rail link followed that of Malaysian Transport Minister Anthony Loke on Tuesday that details of the project will be decided by the Malaysian Cabinet within two weeks. Tun Dr Mahathir said when asked by reporters on Thursday: “We will proceed with the RTS but we will take some time.” Asked if this meant the Malaysian government had resolved 

By The Straits Times
October 18, 2019

Business, Economics

BOK slashes key rate to record-low 1.25%

The government hopes to stimulate a stagnating economy. South Korea’s central bank on Wednesday cut the country’s key interest rate to 1.25 percent, reflecting the sluggish economic growth, low inflation and declining exports. Its second rate cut in three months — to the lowest ever level — is in line with the global trend toward monetary easing. “We have cut the base rate considering the lower-than-expected growth outlook and low inflation,” said Bank of Korea Gov. Lee Ju-yeol in a press conference.The BOK’s rate-setting Monetary Policy Board decided to lower the base rate by 25 basis points from 1.5 percent that it had set three months ago. The move paralleled the US Fed Reserve’s decision last month to lower its key interest rate to the 1.75-2 percent range, down 25 basis points from the previous 2-2.25 percent range. The BOK board cited contractions in trade, sl

By The Korea Herald
October 17, 2019

Business, Economics

Hong Kong leader Carrie Lam unveils measures to ease housing crunch

Lam was forced to deliver speech via video after protests. Embattled Hong Kong leader Carrie Lam announced measures aimed at easing a housing shortage on Wednesday (Oct 16) as she battles to restore confidence in her administration and address widespread discontent after four months of mostly violent anti-government protests. Mrs Lam was forced to deliver her speech via video after her annual policy address in the Legislative Council was aborted when some lawmakers repeatedly jeered and shouted at her as she began speaking. After aborting her speech in the chamber tw

By The Straits Times
October 17, 2019

Business, Economics

Thai labourers face uncertainty over cost of production

The trade war has not left Thailand unaffected. The slowdown in global economy has dampened growth of the support industries in Thailand in its role as a part-producer for foreign investors, with all finished items shipped out to target countries or the parent companies. When investing companies add value to their products and sold at higher prices, Thai producers receive less profits, resulting in low wages for labourers. Production of industrial parts could be easily relocated to other countires, said Chalee Loysong, president of the Confederation of Electronic, Electrical Appliances, Auto and Metal Workers (TEAM). A clear sign of the move emerged when companies started to reduce costs through cutting down on the numbers of both full-time workers and those engaged in outsourced work, he said, adding that the latter are especially prompt to being discarded, given the absen

By The Nation (Thailand)
October 16, 2019

Business, Economics

Bengali Nobel laureate Abhijit at a glance

Abhijit Banerjee shared the Nobel Prize for economics. Indian-born Abhijit Banerjee of the US, French-American Esther Duflo and Michael Kremer of the US today won the 2019 Nobel Economics Prize for their work in fighting global poverty. Here is the brief profile of Abhijit Vinayak Banerjee: Fifty-eight-year-old Abhijit was born in Kolkata of India in 1961. His mother Nirmala Banerjee was a professor of economics at the Centre for Studies in Social Sciences in Kolkata. Abhijit’s father Dipak Banerjee was a professor and the head of the Department of Economics at Presidency College in Kolkata. He went to South Point School and completed his BS degree in economics from Presidency College in Kolkata in 1981.

By Daily Star
October 15, 2019