The economy is facing many headwinds
These are tough times for China. Covid-19 – and the government’s tough approach to any new outbreaks – continues to be a drag on the country’s economy, notably in the leisure and travel sectors. Real estate is of growing international concern and there are real worries of a major crash; confidence in the sector has nose-dived as many developers go bankrupt. We still have no update on the completion rate of uncompleted residential projects after funds were allocated for these projects. In addition, severe droughts have led to electricity shortages, notably in western China. On top of this, there are now even more regulations in place for the internet sector.
All of this is bad news for the jobs market. Labour demand is not recovering as fast as we had thought it would, and wages seem to be coming down in some important industries, including technology.
Real estate is still the main problem
The financial difficulties of residential property developers have come to the public’s attention and some mortgage borrowers have requested delays to repayments on uncompleted residential property sites. Cash tightness is the main characteristic of financially weak property developers, meaning they do not have enough cash to pay their suppliers and complete projects.
The government does not appear to be giving up on deleveraging reforms. Funds are being pooled by policy banks and the central bank in China, and there is also some support from local governments where the uncompleted projects are located. But these support measures are only to be used to finish uncompleted projects so that mortgage borrowers will continue to repay the banks. It could take several quarters to see a positive effect from the announced measures, and it could take years to finish all of the uncompleted projects.
China’s surveyed jobless rate
The economy is facing many headwinds
These are tough times for China. Covid-19 – and the government’s tough approach to any new outbreaks – continues to be a drag on the country’s economy, notably in the leisure and travel sectors. Real estate is of growing international concern and there are real worries of a major crash; confidence in the sector has nose-dived as many developers go bankrupt. We still have no update on the completion rate of uncompleted residential projects after funds were allocated for these projects. In addition, severe droughts have led to electricity shortages, notably in western China. On top of this, there are now even more regulations in place for the internet sector.
All of this is bad news for the jobs market. Labour demand is not recovering as fast as we had thought it would, and wages seem to be coming down in some important industries, including technology.
Real estate is still the main problem
The financial difficulties of residential property developers have come to the public’s attention and some mortgage borrowers have requested delays to repayments on uncompleted residential property sites. Cash tightness is the main characteristic of financially weak property developers, meaning they do not have enough cash to pay their suppliers and complete projects.
The government does not appear to be giving up on deleveraging reforms. Funds are being pooled by policy banks and the central bank in China, and there is also some support from local governments where the uncompleted projects are located. But these support measures are only to be used to finish uncompleted projects so that mortgage borrowers will continue to repay the banks. It could take several quarters to see a positive effect from the announced measures, and it could take years to finish all of the uncompleted projects.
China’s surveyed jobless rate
