New Delhi, March 4 (IANS) China’s re-opening rebound was one of the biggest market bets gone wrong in 2023, with the housing market seeing the worst downturn in the country’s history, dragging down growth and consumption, Emkay Global Financial Services reported. The consequent deflationary state has raised concerns of China staring at decades of stagnation ahead.
China’s ability to demarketise its housing market and factors like non-liberal capital account can help policymakers avoid a Japan-like downward spiral. The country’s slowdown is structural, stemming from the end of an unprecedented expansion in credit and investment over the past decade. China has also reverted to its ‘old’ growth model from a consumption-driven model to manufacturing and exports.
To overcome the current challenges, substantial policy support is needed for consumption, business sentiment, and the housing market. The report emphasizes the importance of fixing policy distortions through major market reforms and restoring confidence to achieve sustainable growth. The real rates have risen significantly, adding to the urgency of policy interventions.
Despite the setbacks, China’s efforts to rekindle growth and navigate the current economic landscape are crucial. The housing market, which plays a significant role in household assets, remains a focal point for policymakers. As fears of a debt-deflation trap loom large, the government faces the daunting task of steering the economy towards a more stable path. The road ahead for China is fraught with challenges, but strategic policy measures may offer a glimmer of hope for a brighter economic future.
–IANS
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