Economy grows 4.5% in the first three months of the year: expectations were for +4%. Domestic consumption up. Increased bank savings, however, signal a drop in private spending in the coming months. For the future, the astronomical debt of local authorities, which has risen to EUR 7,600 billion, weighs heavily. Foreign investors are hedging their bets and moving part of their assets to other countries.
Beijing (AsiaNews) - In the first quarter of 2022, China's economy rebounded to +4.5% year-on-year, a rate higher than expectations, which stood at 4%, and a sign of recovery after Xi Jinping's draconian zero-covidance policy was abandoned in December.
However, the continued rise in youth unemployment (16-24 years old) is dampening this newfound enthusiasm. According to the National Bureau of Statistics, China's jobless youth accounted for 19.6 per cent of the total in March, up from 18.1 per cent in February.
The reopenings after the end of the repeated mass lockdowns boosted consumption, spending on services and infrastructure investment. To some surprise, the real driver of the recovery was still exports, which were expected to fall given weak global demand due to soaring energy costs. However, Chinese industries still had orders left in warehouses due to anti-Covid restrictions.
The positive numbers did not impress the Asian stock exchanges, which tended to lose on the day. The Chinese recovery is not entirely convincing, and not only because of the level of youth unemployment. Falling prices and rising bank savings signal a probable new drop in domestic consumption.
Xi will also have to find a solution to the problem of astronomical local government debt. According to the International Monetary Fund, the amount is 57 trillion yuan (EUR 7,600 billion), almost half the national GDP. Analysts claim, however, that the real amount could be even higher. Moreover, since the central government has said it will not intervene with cash injections, indebted local authorities have started to liquidate their saleable assets.
Beijing also has to deal with capital flight. To reduce risks, many foreign investors have shifted part of their assets in China to other Asian markets. This is the result of concerns over highly restrictive policies such as the pandemic, combined with Xi's crackdown on the private sector and Washington's trade and financial restrictions on Beijing.
Apple is one of the foreign companies that has taken production quotas out of China. The US telephony giant opened the first of two megastores today in Mumbai, India - the other will open on 20 April in New Delhi. Mostly thanks to the Taiwanese assembler Foxconn, 7% of the iPhones, worth EUR 6.4 billion, are produced on Indian soil.