China’s Economy Fizzles For This Reason

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  • China is on course for its slowest economic expansion in 40 years, say economists, as a new report claims its share of global trade growth will be halved over the next five years.
  • DHL’s new Trade Growth Atlas report predicts China’s share of global trade growth will fall 50% between 2021 and 2026, to 13%.

A recent news article published in The Loadstar states that China’s economy stutters as global economic centre of gravity shifts south.

Last year’s Delta infection wave

Factory output was better than expected in August, with 4.6% year-on-year growth, but analysts say this was due to August 2021 being a low base for comparison, as it was during last year’s Delta infection wave.

Julian Evans-Pritchard, senior China economist at Capital Economics, said: “China’s economy held up slightly better than anticipated last month, but momentum still weakened relative to July, amid renewed virus disruptions and factory closures due to power shortages. September is shaping up to be even worse.

“And, while the current virus wave may have peaked, activity is set to remain weak over the coming months amid a deepening property downturn, softening exports and recurring Covid-19 disruptions.”

The second slowest rate in 40 years

China’s economy is forecast to expand 3.5% this year, the second slowest rate in 40 years, according to a Bloomberg survey, and the weakening of the currency poses challenges, too; this month it fell to its lowest level against the US dollar since July 2020.

A survey of manufacturers in the Greater Bay Area by Standard Chartered revealed SMEs there were particularly concerned over the increased exchange rate volatility, given half of the respondents are using the yuan for settling international trade.

DHL’s new Trade Growth Atlas report

Meanwhile, DHL’s new Trade Growth Atlas report predicts China’s share of global trade growth will fall 50% between 2021 and 2026, to 13%, as trade spreads across a wider variety of countries.

Between 2016 and 2021, China ranked first, with the fastest growth in both exports and imports. However, between 2021 and 2026, Asean countries are forecast to overtake it, followed by South and Central Asia and Sub-Saharan Africa.

The report says: “New poles of trade growth are emerging in South-east and South Asia and trade growth is forecast to accelerate dramatically in Sub-Saharan Africa. After decades of shifts to the east, the centre of gravity of world trade is poised for a turn south.”

 

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Source: The Loadstar

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