In his New Year’s address, Chinese President Xi Jinping admitted that “some enterprises were going through difficult times” in 2023, as data showed – a deepening weakening of factory production this month, but announced an acceleration of the pace of economic recovery.
– We will definitely encounter opposites. Some enterprises were going through difficult times. Some people had difficulty finding jobs and meeting basic needs, Xi admitted in a televised speech.
The Chinese leader also reiterated his intention to annex Taiwana self-governing democracy that Beijing says is a Chinese province, saying it “will definitely be reunified.”
Record youth unemployment in China
The recovery of the world’s second-largest economy remains bleak, hampered by a severe housing crisis, weak global demand and record youth unemployment. Evergrande, once China’s largest developer, has begun a painful debt restructuring process, while its main rival Country Garden went bankrupt in October.
Factory activities in China fell more than expected in December due to a decline in new orders.
The worse-than-expected data had a negative impact on the economic outlook and increased expectations for the introduction of new stimulus measures in 2024.
Xi said that in 2024, the 75th anniversary of the founding of the People’s Republic of China, “we will consolidate and strengthen the momentum of economic recovery and work to achieve steady and long-term economic development. We will deepen reforms and general opening up.”
A vicious circle in the Chinese economy
China’s PMI fell to 49 in December from 49.4 in November, below the 50-point mark that separates growth from decline. It was the third month of declines and the weakest reading since June. The main drag was new orders, which fell to 48.7, while export new orders also worsened, with a reading of 45.8. Production remained in the growth area but fell to 50.2.
“We need to increase policy support, otherwise the trend of slowing growth will continue,” Nie Wen, an economist at Hwabao Trust, told The Guardian. He does not expect the central bank to cut rates in the coming weeks interest rates and banks’ reserve requirement ratios. “Falling prices have significantly affected company profits, as well as people’s employment and income. We may observe a vicious circle,” he said.
Main photo source: REUTERS