JC Fulton Alliance analysts say China’s future economy may bear the repercussions of bad loans and weak consumption.
Apprehension over China’s economic activity has grown as expansion has slowed during the pandemic. Analysts at JC Fulton Alliance were correct in estimating GDP growth in the region of 8% for the second quarter.
While this GDP expansion rate is significantly lower than that of the first quarter, which saw a whopping 18.3% growth, it matches expectations when contextualized in an unsteady Covid-struck global economy. In fact, China’s 8% growth, and probable full-year 8% expansion, proves favourable when compared to the GDP growth in major Western economies.
The United States, one of China’s main economic competitors, currently shows a GDP expansion rate of 6.4%.
However, analysts at JC Fulton Alliance are suggesting that the arrival of issues such as unsustainable, weak consumption and the slowing down of exports could hinder China’s economic growth. China’s relationship with the United States is another uncertainty that analysts have noted. Perhaps most threatening is an influx of bad loans. At the end of June, outstanding loans in banks increased by 108.3billion yuan (or 9.1%) from the start of 2021 to 301trillion yuan.
Analysts at JC Fulton Alliance, see a continuation of fiscal policies as the way forward in grappling with this conundrum and aiding in post-Covid development. Policymakers plan to generate profit with fiscal spending, focusing on rapidity in infrastructure investment, which government financing vehicles will propel. In the first half of the year, a mere 1.01trillion yuan was used by local governments to support infrastructure projects, meaning an annual decrease of 72.2% in funding. In addition, property loan growth declined to 10.3%. New policies are expected to be announced by the end of July after the Politburo’s second quarter economic meeting.
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