Amid China’s economic slowdown, the country’s economic challenges may increase manifold and its economy may be hit harder in the wake of the Ukraine-Russia crisis. China’s economic slowdown has impacted its government with 28 of China’s 31 provincial-level governments announcing reduced growth targets and policy goals for 2022 as compared to previous years, reported The HK Post.
Even the more developed regions such as Shanghai, Guangdong and Beijing targeted a lower growth rate of 5-5.5 per cent as against 6 per cent in the previous year. Moreover, with the expanding scope of sanctions on Russia, the Chinese economy may be hit harder. The Ukraine crisis could add new problems as China imports grain, soybean and hi-tech equipment from the country. President Xi Jinping is particularly worried about the bleak economic outlook of the country as it may adversely impact his bid for another term at the 20th Party Congress later this year.
The times ahead may be tough for China due to the need for reworking and restructuring of the ruptured industrial chain caused by the Covid pandemic, the pressure of carbon reduction and global supply chain disruptions, reported The HK Post. Growing unemployment too was leading to doubts regarding the government’s ability to resuscitate the economy.
There was apparently unprecedented pressure on central and provincial governments as they were confronted with revenue shortages, even to maintain their routine expenditure. Local governments across China had ordered teachers and officials to pay back bonuses. Civil service bonuses had been suspended in Shanghai, Jiangxi, Henan, Shandong, Chongqing, Hubei and Guangdong.
The demand for bonus reversals indicates that the Chinese government was undergoing something of a fiscal crisis, reported The HK Post. Rising unemployment due to pandemic-led dislocations among the youth may dent the popularity of the Chinese government and the CPC.
The situation in the job market further worsened due to regulatory crackdowns on private tech companies by the government. Chinese small businesses have not recovered from the setback caused by the Covid pandemic as they had closed down or were running sub-optimally. As per official Chinese data, 4.37 million of China’s small businesses closed permanently in the first 11 months of 2021, reported The HK Post.
Apart from the Covid shock, the Chinese job market was also under pressure due to an ageing population and delayed recovery in the services sector. China’s financial sector has also been adversely impacted. The China Banking and Insurance Regulatory Commission recently revealed that a total of 2,459 bank outlets of commercial banking institutions had ceased operations and its four major banks including Industrial and Commercial Bank of China (ICBC), the Agricultural Bank of China (ABC), the Bank of China (BOC) and the Construction Bank were compelled to close down 187 branches and retrench 22,355 personnel.
President Xi’s declared goal of “Common Prosperity” too has created new uncertainties in Chinese business circles. Beijing has progressively tightened controls on big business and imprisoned a number of billionaires despite receiving donations from them. This may hamper the morale of entrepreneurs and consequently, economic growth, reported The HK Post.