CNN MEANWHILE IN CHINA -Laura He, The Chinese economy is in trouble. Here’s what’s gone wrong - Xi unexpectedly skipped a key BRICS event. No one is saying why

 

Laura He   The Chinese economy is in trouble. Here’s what’s gone wrong

China has long been the engine of global growth.   But in recent weeks, its economic slowdown has alarmed international leaders and investors who are no longer counting on it to be a bulwark against weakness elsewhere. In fact, for the first time in decades, the world’s second-largest economy is itself the problem.   Hong Kong’s Hang Seng Index slid into a bear market last Friday, having fallen more than 20% from its recent peak in January. Last week, the Chinese yuan fell to its lowest level in 16 years, prompting the central bank to make its biggest defense of the currency on record by setting a much higher rate to the dollar than the estimated market value.   The issue is that, after a rapid spurt of activity earlier this year following the lifting of Covid lockdowns, growth is stalling. Consumer prices are falling, a real estate crisis is deepening and exports are in a slump. Unemployment among youth has gotten so bad the government has stopped publishing the data.   To make things worse, a major homebuilder and a prominent investment company have missed payments to their investors in recent weeks, rekindling fears that the ongoing deterioration of the housing market could lead to heightened risks to financial stability.   A lack of resolute measures to stimulate domestic demand and fears of contagion have triggered a new round of growth downgrades, with several major investment banks cutting their forecasts of China’s economic growth to below 5%.   “We downgrade China’s real GDP growth forecast … as the property downturn has deepened, external demand has weakened further, and policy support has been less than expected,” UBS analysts wrote in a Monday research note.   Researchers at Nomura, Morgan Stanley and Barclays had previously trimmed their forecasts.   That means China might significantly miss its official growth target of “around 5.5%,” which would be an embarrassment for the Chinese leadership.   It’s a far cry from the global financial meltdown of 2008, when China launched the largest stimulus package in the world and was the first major economy to emerge from the crisis. It’s also a reversal from the early days of the pandemic, when China was the only major developed economy to dodge a recession. So what’s gone wrong?   Property woes   China’s economy has been in the doldrums since April, when momentum from a strong start to the year faded. But concerns have intensified this month following defaults by Country Garden, once the country’s largest developer by property sales, and Zhongrong Trust, a top trust company.   Reports that Country Garden had missed interest payments on two US dollar bonds spooked investors and rekindled memories of Evergrande, whose debt defaults in 2021 signaled the start of the real estate crisis.   While Evergrande is still undergoing a debt restructuring, troubles at Country Garden raised fresh concerns about the Chinese economy.   Beijing has rolled out a raft of supportive measures to revive the real estate market. But even the stronger players are now teetering on the brink of default, underscoring the challenges Beijing faces to contain the crisis.   In the meantime, debt defaults at property developers appear to have spread to the country’s $2.9 trillion investment trust industry.   Zhongrong Trust, which managed $87 billion worth of funds for corporate clients and wealthy individuals, has failed to repay a series of investment products to at least four companies, worth about $19 million, according to company statements from earlier this month.   Angry demonstrators even protested recently outside of the office of the trust company, demanding payouts on high-yield products, according to videos posted on Chinese social media seen by CNN.   “Further losses in the property sector risk spilling over into wider financial instability,” said Julian Evans-Pritchard, head of China economics at Capital Economics.   “With domestic funds increasingly fleeing to the safety of government bonds and bank deposits, more non-bank financial institutions could face liquidity problems."   Read the full story here.

Laura He is a reporter and digital producer for CNN Business. She covers news about Asian business and markets from Hong Kong.

Chinese Valentine's Couples celebrate Qixi Fetsival, known as "China's Valentine's Day," at a Tang Dynasty-style wedding ceremony in the northwestern city of Xi'an.   Qixi, also known as the Double Seventh Festival, falls annually on the seventh day of the seventh month on the lunar calendar. It dates back to a mythical bittersweet love story from the Han dynasty about 2,000 years ago.   According to legend, the star-crossed lovers – a cowherd and a goddess – were separated by the Goddess of Heaven who didn't approve of their marriage. Divided by heaven and the Earth, they were only allowed to reunite once a year, on Qixi, on a bridge formed by magpies that straddled the Milky Way.

Xi unexpectedly skipped a key BRICS event. No one is saying why Chinese leader Xi Jinping on Tuesday unexpectedly skipped a business forum of the BRICS economic group in South Africa, sending his commerce minister instead to deliver a fiery speech in his name that decried US hegemony.   Xi, who arrived in Johannesburg on Monday for the annual BRICS summit of major emerging economies, was scheduled to deliver a speech at its business forum on Tuesday alongside leaders from India, Brazil and South Africa.   But the Chinese leader failed to show up at the event, with no official announcement or explanation from Beijing.   Instead, his prepared statement – peppered with thinly-veiled swipes at the United States that have become a fixture of Xi’s international speeches – was delivered by Chinese Commerce Minister Wang Wentao.   Xi was the only BRICS leader who did not attend the forum. Even Russian President Vladimir Putin, who could not join the summit in person due to an international arrest warrant for his brutal invasion of Ukraine, delivered remarks virtually.   After skipping the forum, Xi later attended a dinner hosted by Ramaphosa, along with the leaders of Brazil and India, and Russia's foreign minister.   Xi’s surprise absence from the forum, noted by journalists at the event, raised questions among long-term observers of Chinese foreign policy.   “It’s extremely unusual for a Chinese leader to show up in a country hosting a multilateral meeting – especially one that China is deeply invested in, like BRICS – and fail to show up at the opening event,” said Bonnie Glaser, managing director of the German Marshall Fund’s Indo-Pacific program.   Brian Hart, a fellow with the China Power Project at the Center for Strategic and International Studies, said Xi’s absence is “highly unusual,” adding that Chinese leaders rarely go off script at high-profile events like this.   “It seems that something pulled Xi away from the meeting. It could have been a health incident or perhaps a pressing matter that required his attention,” he said. “It is also possible Xi skipped the event for some other reason – perhaps in response to developments at the summit.”   Earlier Tuesday, Xi met with Ramaphosa as part of his state visit to South Africa before later joining his host and the other visiting dignitaries for dinner.   “The fact that Xi skipped his speech at this meeting, but showed up to other engagements before and after this one, suggests there was something acute that pulled him away during this window. But at this point we just don’t know the reason,” Hart added.

Nectar Gan is China Reporter for CNN International in Hong Kong. She covers the changes taking place in China, and their impact on the world.

Around the region Children were among eight passengers who endured a 14-hour ordeal stranded in a broken cable car hundreds of feet above the ground. Here's how Pakistani rescue workers saved them. A jet ski rider detained by South Korea for allegedly entering the country illegally is a prominent Chinese dissident who rode hundreds of miles across the sea to escape from China, activists say. A new report into Japan’s military has found what it says is an entrenched culture of harassment and fear, with authorities promising reform and “drastic measures.” The Philippines on Tuesday said it had successfully delivered supplies to marines aboard the BRP Sierra Madre, a dilapidated military outpost in the contested South China Sea, despite attempts by Chinese vessels to block the mission.

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