China’s economy continues to slump, oil prices fall

A poll by Caixin news agency on Monday found that as the second half of 2022 begins, China’s economy is in a slump, with manufacturing activity slowing, unemployment rising and the property market sluggish.

China’s sluggish economy reduces demand for oil, while sluggish manufacturing data elsewhere drives oil prices higher Down four percent.

Caixin polls established Manufacturing activity in China slowed sharply in July and may even contract after the latest round of coronavirus lockdowns ended in June and led to a surge in output.

China Beige Book International (CBBI), an investor advisory firm, Say Factory output slowed to its highest level since mid-2020 in July, while retail unemployment hit a two-year high — There are signs that Chinese city dwellers and business managers “don’t believe their zero epidemic nightmare is over at all”.

“The retail sector is the most troubled. CBBI chief economist Derek Scissors said there was now almost a certainty of business deaths happening in the sector, underscoring fears that the coronavirus lockdown could happen again at any time without warning.

Other economic surveys found that China’s property market slid 33% after surging 89% after the lockdown was lifted in June, with gross domestic product (GDP) rising just 0.4% in the second quarter, despite 3.1 percent of post-lockdown retail spending.

Consumer spending is likely to stagnate as weak factory output and well-publicized layoffs have many Chinese workers worried about their jobs. Some are taking advantage of the housing bubble to sell homes for cash to make up for lost income from downsizing and layoffs.

Analysts have compared the current situation to China’s recovery from a market crash and banking scandal in 2015, as consumer spending continued to grow in 2015 and stalled today. Additionally, today’s real estate industry has wide-ranging and controversial issues that could prevent it from saving the rest of the consumer economy.

When China’s troubled real estate giant China Evergrande failed to deliver on its promised $300 billion restructuring plan over the weekend, analysts said NBC Finance Losing confidence in real estate could create a “negative feedback loop” that drags down the rest of China’s economy.

China’s real estate industry has been caught up in an extraordinary “mortgage riot”, with homeowners refusing to make repayments because they believe developers will not complete construction and renovation projects.

“If this issue is not handled properly, it will have far-reaching effects on the economy, including government balance sheets, bank balance sheets and households,” Standard Chartered economist Ding Shuang told CNBC.

Ding pointed out that the real estate crisis could cause significant damage to the Chinese government’s finances, since most of the provincial governments’ revenue comes from taxing land sales. The looming collapse of the giant Evergrande has spooked investors and suffocated the market, while individual homebuyers expressed their frustration through a mortgage revolt.

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