The News
Asian markets fell as investors and economists expressed disappointment after a keenly watched meeting of China’s economic leadership.
Beijing vowed to borrow and spend more, saying ramping up domestic consumption was a top priority. The promise was part of its efforts to shore up a flagging economy grappling with huge debt levels, worrying levels of unemployment, and the looming threat of deflation.
Traders, however, were unimpressed: Chinese stocks led Asian markets lower, while the country’s bond yields also fell — in this case, a sign of worries over future economic growth. And while China’s leader Xi Jinping has said he is confident the country will hit its 5% growth target, one prominent Chinese economist said expansion would top out at 4%.
SIGNALS
China’s ongoing economic struggles
China appears willing to take more aggressive steps to increase spending, with lowering interest rates on the table after years of reluctance to do so, The New York Times wrote. The collapse of China’s real estate market in 2021 — where many households built their wealth — as well as a lack of local government funding mean millions of workers have been left unemployed and consumers are reluctant to spend. China’s private sector will also need more attention, the South China Morning Post wrote, and officials have vowed once again — with little success — to counter the “neijuan” phenomenon, where intra-industry competition stifles innovation.
China’s economy faces looming threats from Trump presidency
One of China’s other leading concerns is exports: Former US President Donald Trump has vowed to hike tariffs on Chinese imports upon his return to the White House in January. The move would have a devastating effect on the Chinese economy, which was built on decades of manufacturing aimed at foreign markets. Beijing is looking to “beat the next US president to the punch” by imposing its own restrictions on US trade: China recently launched a probe into American chip company Nvidia over supposed antitrust violations and banned exports of rare minerals to the US. China is looking to “amass bargaining chips” before Trump’s inauguration, Reuters wrote, and “get Washington to the negotiating table” to avoid an all-out trade war.