inflation VS deflation? forcasts on Q3 Economies between West and China (02)
China’s weak economic recovery predicament urgently needs to be broken
In the second quarter 2023, China’s economy maintained a recovering momentum, but due to insufficient inner demand and unstable market expectations, the momentum of economic recovery showed an obvious weakening trend. In terms of growth contributing factors, impotent civil income and employment expectations constrained internal consumption growth, meanwhile,manufacturing and real estate investment growth continued to decline, and shrinking external demands led to a sharp drop in export growth. Additionally,from the perspective of financial fundamentals, new growing credits, increasing number of corporate bonds, and government bonds dragged down the social financing market and weakened it. This is reflected in the continuous expanding gap between M1 and M2 growth rate YOY. That is to say,insufficient market demand and contractionary credits are in fact hindering the Chinese economic recovery,in other words,China is facing phased deflationary pressure.
The main contradiction in the current Chinese Domestic Economy is that, the civil weaker expectations of micro-outlooks and the mounted debts to the balance sheets, led to weakening residents’ demands expansion, which was further manifested in the shrinking residential financial assets that caused citizen’s on-going actively deleveraging operations;More nearly,declining profits and lack of confidence impaired the willingness of enterprises to increase leverages. Besides,the already receded Real Estate market gave rise to dramatically decreasing “land sales finance”,as well as hiking debt repayment pressure, which forced local governments to deleverage passively, all in all,civil precautionary savings and government scheduled debt repayments, blocked the monetary policy transmission from loose money to credit easing efforts.
Based on stated above,from Q3 2023, it is expected that China’s annual economic growth rate is quite hard to reach around 5%, which will largely lead to continued slidings in both CPI and PPI.
