Collapse of service industry threatens Xi Jinping’s 'common prosperity'

Worst data since the beginning of the pandemic. New lockdowns, recent floods and a difficult global economic picture weigh heavily. Youth unemployment at 16.2%. Crackdown on hi-tech giants burned €845 billion on the stock market. The impact of the fight against climate change.

Beijing (AsiaNews) - The Chinese economy is continuing to contract according to data published today by the National Bureau of Statistics. The combined index of manufacturing and services industries fell from 52.4 points in July to 48.9 in August. Excluding the early months of the pandemic last year, this is the worst data since the 2008 financial crisis.

The drop in the services index from 52.5 to 45.2 dragged the index down. A reading above 50 indicates economic growth; below contraction. The imposition of lockdowns to control the outbreak of new Covid-19 variants and the effects of massive flooding in central China have negatively affected the country's economic recovery.

This is compounded by the problems created by the Delta on the global trade supply chain. The global economic picture remains fragile, as evidenced by the declining results of China Investment Corporation. Last year, Beijing's sovereign wealth fund earned a 14.1% return on its foreign investments: in 2019, the figure was 17.4%, the best since the company's founding in 2007.

In the long run, the difficulties of the tertiary sector could set off a social time bomb in China. The sector is the natural outlet for Chinese young people, especially college graduates. Official figures, however, show an increase in unemployment in the 16-24 age bracket: in July unemployment rose to 16.2% from 15.4% in June and 13.8% in May.

Analysts from the National Bureau of Statistics claim that Chinese companies are confident of a further acceleration of the economy in the coming months. However, the impact of the antitrust campaign launched by Xi Jinping against domestic hi-tech giants has yet to be assessed: Beijing's crackdown has caused Chinese technology companies to lose 845 billion euros in stock market shares.

The Chinese president's declared aim is to achieve a national "common prosperity", favouring the fight against wealth inequalities, in order to push up domestic consumption. According to various observers, his battle against monopolies is in contradiction with the protection of large state-owned enterprises, which often control entire sectors of the economy.

China's future also depends on the commitments it has made to combat climate change. As the South China Morning Post reports, Lou Jiwei warns that efforts to achieve "zero emissions" of carbon dioxide by 2060 are a threat to the national supply chain. According to the former finance minister, they also risk generating structural inflation in the country.