Don't Count on China to Bail Out the Global Economy This Time (2024)

FAQs

Is China's economy in trouble 2022? ›

China's economy may have already bottomed out in the second quarter of this year, but its recovery remains fragile. The EIU is forecasting 3.3 percent GDP growth for China in 2022, and we are more optimistic than many.

The International Monetary Fund recently cut its forecast for China's growth to 3.2% this year, representing a sharp slowdown from 8.1% in 2021. That would be the country's second lowest growth rate in 46 years, better only than 2020 when the initial coronavirus outbreak pummeled the economy.

China's financial crises is getting worse. In this latest phase, Chinese banks, anticipating huge loan losses, have taken dramatic steps to enhance their loan loss reserves, tapping China's bond markets for some 30 percent more funds than they did last year. The banks' problems are hardly a surprise.

Amid multiple domestic and external headwinds, China's GDP growth is expected to slow sharply to 2.8 percent in 2022, from 8.1 percent in in 2021. Wide-spread Omicron outbreaks and extreme weather have weakened economic growth.

The Chinese language is rich in hom*ophones, which makes it easy to turn numbers into proxies for words and phrases, like 88 (bābā) or 'bye-bye. ' That explains why 666 (liùliùliù) refers to the Chinese word for smooth or skilled (溜, liù) instead of the devil.

China's population is over four times bigger than America's. Its economy could therefore surpass America's in scale long before it matches it in sophistication. Its GDP per person needs to reach only a quarter of America's for its total GDP to become the biggest in the world.

While this number may seem large, the total amount of U.S Treasuries outstanding is more than 30 trillion dollars. And, China isn't even the largest foreign holder of American debt.

Many factors have slowed China's growth outlook, some compounded by policy mistakes. COVID-19 outbreaks, hardships imposed by draconian public health mandates, and sliding property prices all threw shade on President Xi's big plans for a year of stability.

If China (or any other nation having a trade surplus with the U.S.) stops buying U.S. Treasuries or even starts dumping its U.S. forex reserves, its trade surplus would become a trade deficit—something which no export-oriented economy would want, as they would be worse off as a result.

Are companies pulling out of China? ›

Nearly twice as many U.S. companies cut their investment in China this year versus last year, the American Chamber of Commerce in Shanghai found in its latest survey. Almost double the number of respondents redirected planned China investments to other destinations in the past year, the survey found.

Gross Domestic Product turned negative in the first half of 2022, but rebounded back to positive growth in the third quarter. The unemployment rate remains low, even as many businesses begin to lay off workers. Employee wages continue to rise, pointing to a recession that is not yet present.

Economic Outlook Note - China

Economic growth will slow to 3.3% in 2022 and rebound to 4.6% in 2023 and 4.1% in 2024. The emergence of the omicron variant has led to recurring waves of lockdowns in 2022, disrupting economic activity.

Key Takeaways. China's economy has grown to one of the largest and most powerful in the world over the past few decades. Driven by industrial production and manufacturing exports, China's GDP is actually now the largest in terms of purchasing power parity (PPP) equivalence.

China's economy is slowing down as it adapts to a punishing zero-Covid strategy and weakening global demand. Official growth figures for the July to September quarter are expected soon - if the world's second-largest economy contracts, that increases chances of a global recession.

555 "(crying)". 555 (pinyin: wǔwǔwǔ) represents 呜呜呜 (pinyin: wūwūwū) the sound of tearful crying, but it is not towards the feeling of sadness, but more of pitiful.

In Chinese numerology, 888 usually means triple fortune, as a form of strengthening of the digit 8. On its own, the number 8 is often associated with great fortune, wealth and spiritual enlightenment. Hence, 888 is considered triple.

The numbers 8, 2, 6, and 9 are the favorite lucky numbers of most Chinese people. Combinations of the above are deemed as lucky numbers too, such as 66, 88, 168.

"China would overtake the United States to become the world's largest economy in nominal US dollar terms by about 2030," the report's authors conclude.

If the property downturn is deeper than expected and COVID zero restrictions remain beyond 2023, GDP growth may average below 4% over the next decade, meaning China likely wouldn't overtake the U.S. until the mid-2030s, and any lead may be reversed as demographics become a drag a decade later.

Will China overtake US in technology? ›

U.S. lawmakers passed the $280 billion CHIPS and Science Act out of a fear that China was about to overtake the U.S. in scientific and technological expertise. But a recently released study suggests that, by one measure, China already has.

Japan is the largest holder of U.S. debt.

Overpopulation is directly affecting China's economy by higher unemployment rates, food shortages, increased environmental change, and reducing the standard of living.

Reforms such as liberalization of investment and trade, promoting the creation of private and rural enterprises, relaxed state control over some prices, industrial production, and increased education investments contributed to the growth of the country's economy (Hu and Khan, 1997) .

Economists generally attribute much of China's rapid economic growth to two main factors: large-scale capital investment (financed by large domestic savings and foreign investment) and rapid productivity growth.

At the end of 2020, of the 97 countries for which data was available, Pakistan ($77.3 billion of external debt to China), Angola (36.3 billion), Ethiopia (7.9 billion), Kenya (7.4 billion) and Sri Lanka (6.8 billion) held the biggest debts to China.

The countries with the biggest debt burdens in relative terms were Djibouti and Angola, where debt to China exceeded 40 per cent of gross national income, an indicator similar to GDP but also including income from overseas sources.

The U.S. doesn't restrict who may buy its securities. China invests in U.S. debt because of the positive effect these low-risk, stable investments can have on its economy. By investing in dollar-denominated securities, the value of the dollar increases relative to the value of China's currency, the yuan.

Does China Own the U.S. debt? ›

Key Takeaways

China, which owns an estimated $972 billion in U.S. Treasuries, is the number-two investor among foreign governments. China buys Treasuries to help depress the value of its currency, the yuan. A cheaper yuan makes the country's exports less expensive for foreign buyers.

This group is comprised of commercial banks, mutual funds, pension funds, state and local governments, and insurance companies. They typically are more rate sensitive than the Fed and foreign governments. Collectively US Financial Institutions is the largest of the three groups of buyers of Treasuries.

According to U.S. Department of Agriculture (USDA) reports, Chinese investors' holdings of U.S. agricultural land surged from 13,720 acres in 2010 to 352,140 acres in 2020.

A growing number of global shippers view Mexico as an alternative sourcing location to China and other Asian nations by either relocating manufacturing operations just south of the border or choosing to expand existing production in Mexico, experts said.

Liao's decision came as global tensions and their impact on trade, and the strict policies of Chinese President Xi Jinping, made doing business in China less predictable. For Liao, the idea of leaving China gained momentum in 2021 when random and frequent power cuts started impacting factory production.

Apple is telling suppliers to plan more actively for assembling Apple products elsewhere in Asia. Burned by Covid lockdowns and worker protests at Foxconn plants, the iPhone maker is looking to diversify the supply chain.

While the consensus is that a global recession is likely sometime in 2023, it's impossible to predict how severe it will be or how long it will last. Not every recession is as painful as the 2007-09 Great Recession, but every recession is, of course, painful.

What Happens in a Recession? Economic output, employment, and consumer spending drop in a recession. Interest rates are also likely to decline as the central bank (such as the U.S. Federal Reserve Bank) cuts rates to support the economy.

The U.S. will probably stick a soft landing next year: the world's largest economy is forecast to narrowly avoid a recession as inflation fades and unemployment nudges up slightly, according to Goldman Sachs Research.

Will Chinese economy recover in 2022? ›

China's Q3 2022 Economic and Trade Roundup: Recovery Better Than Expected. China Q3 2022 data shows economic recovery was faster-than-anticipated but zero-COVID policies and global recessionary trends are constraining efforts at a broader growth rebound.

“We are close to the threshold of high-income countries,” Han said. Statistically, China already stands at the doorstep of the high-income club, defined by the World Bank as those with gross national income per capita above US$12,695 in 2021.

With the world's second-largest economy, a permanent seat in the United Nations Security Council, a modernised armed force and an ambitious space programme, China has the potential to replace the United States as the greatest superpower in the future.

China ranks first in terms of trade in goods and foreign exchange reserves, and ranks second in terms of its trade in services and consumer market.

The international lending agency based in Washington, DC cut China's projected real GDP growth forecasts to 3.2% in 2022 and 2.7% in 2023 (down from 8.1% in 2021), according to the World Economic Outlook report released on October 11.

China's financial crises is getting worse. In this latest phase, Chinese banks, anticipating huge loan losses, have taken dramatic steps to enhance their loan loss reserves, tapping China's bond markets for some 30 percent more funds than they did last year. The banks' problems are hardly a surprise.

Economic Outlook Note - China

Economic growth will slow to 3.3% in 2022 and rebound to 4.6% in 2023 and 4.1% in 2024. The emergence of the omicron variant has led to recurring waves of lockdowns in 2022, disrupting economic activity.

Fitch forecasts growth in mainland China to recover partially to 4.1% in 2023, from 2.8% in 2022, both well below pre-pandemic trends. With social tensions running high, we expect the mainland authorities to retire the most draconian elements of “zero Covid” - such as city-wide lockdowns.

While this number may seem large, the total amount of U.S Treasuries outstanding is more than 30 trillion dollars. And, China isn't even the largest foreign holder of American debt.

Causes of China's Economic Growth

Economists generally attribute much of China's rapid economic growth to two main factors: large-scale capital investment (financed by large domestic savings and foreign investment) and rapid productivity growth.

How strong is the China economy today? ›

Projecting the Extent of China's Population Decline

A line chart shows how the United Nations projects that China's population could decline from 1.4 billion people in 2022 to 770 million in 2100 in a medium-fertility scenario and 494 million in a low-fertility scenario.