12/14/2023, 11.56
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Beijing confirms 5% growth, but debtors and people excluded from welfare rise

by John Ai

This is the GDP target set for 2024 at the conclusion of the Chinese Communist Party's economic conference. At the centre of the proceedings are fears over the real estate sector and obstacles to recovery. The propaganda is functional to the recovery attempt after the post-Covid clouds. Over 8.5 million people on the 'blacklist' for not having repaid bank loans, another 19 million without medical assistance.

Beijing (AsiaNews) - This week China concluded its annual economic conference. The leaders of the ruling Communist Party have set the GDP (Gross Domestic Product) growth target for 2024 at 5%, amid general risks of debt for the entire country and a tendency towards deflation.

China's official Xinhua news agency admitted that the Chinese economy is facing several risks and uncertainties, including lack of demand, excess capacity in some sectors and weak expectations of society in general.

The closed-door meeting of the plenum highlighted a situation of stability in terms of recovery for 2024, demonstrating that the authorities are aware of the risks associated with the economic sector. Furthermore, the meeting also served to define three main objectives for economic activity in the coming year: strengthening vitality, preventing and resolving risks and improving social expectations.

Prevention of systemic risk is the main task. The meeting mentioned the risks of the real estate sector, the insolvencies of local governments and the crisis of financial institutions. Once upon a time, the real estate sector was a driving force behind growth, it alone contributed almost 30% of the national GDP, but in these two years there have been serious difficulties.

The sudden collapse of some real estate giants such as Evergrande and Country Garden caused spillover effects that transferred risks to financial institutions and shadow banks. Huge debts have also resulted in paying high prices for home purchases and taking out expensive bank loans for apartments.

Added to this is the bankruptcy and insolvency of real estate agencies and construction companies, which have left housing projects unfinished. The protest of families who ended up bankrupt for purchasing unfinished buildings has continued since last year and is still an unresolved issue today.

Millions of people are on the authorities' blacklist in the credit system due to the inability to repay bank loans. According to Chinese court statistics, the number of people on the blacklist has risen to 8.54 million in the current year, up from 5.7 million in 2020.

Those on the blacklist are barred from the banking system and cannot purchase airline tickets. Most defaulters are aged between 18 and 59, almost 1% of the total active population. The reasons for non-compliance vary. Some were unable to repay their home loans, others were unable to repay their credit cards due to job loss. After the youth unemployment rate in China exceeded 20%, the Beijing authorities stopped disclosing the data.

The company is losing faith in growth. The expected rapid recovery and rebound have not occurred, on the contrary the risk of deflation is looming. China's consumer price index fell 0.5% in November, the fastest in three years, data released by China's National Bureau of Statistics showed. Economists expect downward pressure to continue into 2024.

Last week, Moody's issued a downgrade warning on China's credit rating, saying the costs of bailing out local governments and state-owned enterprises and controlling the housing crisis would have weighed enormously on the economy. The response from the Chinese authorities was immediate and they welcomed Moody's observations with disappointment, stating that the risks were completely controllable.

The meeting which recently concluded also set itself the aim of increasing the country's expectations and confidence, "strengthening economic propaganda and guiding opinions". After three years of Covid-19-related lockdowns and closures in China, demand has not increased; on the contrary, people prefer to consume less and bank savings have increased to cope with situations in case of uncertainty or emergency.

Faced with a decreasing population and an aging trend, China has increased social assistance deductions which represent a burden for families. Last year, in fact, around 19 million people abandoned the social insurance system and medical assistance. And the prospects are for a further decrease: according to estimates, the number of people who are part of the insurance system in the medical and welfare field is destined to decrease also for 2023.


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