According to Nomura Holdings Inc., China’s economy is under extreme pressure since the first wave of Covid-19 struck in the spring of 2020. Construction and real estate sales are down. Due to growing expenses and lacklustre sales, many firms have a shutdown. Local governments that are in debt are reducing public worker wages. In the closing months of the last fiscal year, China’s economy slowed significantly, as the government steps in to curb real estate speculation. This harmed other industries as well. Consumer spending came down due to lockdowns and travel restrictions to combat the coronavirus. New restrictions are affecting everything from online enterprises to after-school tutoring services as waves of layoffs have been witnessed.
China’s National Bureau of Statistics recorded, that economic output from October to December last year was just 4% more than the same time the previous year. The economic output was down from a 4.9 per cent increase in the third quarter, which ran from July to September last year.
During the epidemic, global demand for consumer electronics, furniture, and other home comforts drove China’s exports to new highs, preventing the country’s GDP from slowing. China’s economic production was 8.1 per cent greater last year than in 2020, according to the government. However, much of the expansion occurred in the first half of last year. China’s authorities are facing a conundrum as the economy is showing signs of a slowdown. The government has implemented measures to combat income disparity and rein in corporations as part of a long-term strategy to safeguard the economy and national security. Officials are wary of producing short-term economic volatility, especially in such a politically significant year.
Recently, the accounts of a famous market analyst on Chinese social media have been deactivated after he highlighted the country’s catastrophic economic downturn and the consequences of government policy on the IT industry in recent weeks. Tencent’s (TCEHY) WeChat went silent on Hong Hao’s public account over the weekend. Hong Hao is the managing director and head of research at BOCOM International, the investment banking arm of the Bank of Communications, China’s fifth-largest state-owned bank. He was fired after posting on social media about massive capital outflows from the nation and making gloomy predictions about the Chinese stock market.
The contents on the site had been banned. “The user is no longer permitted to use the account” According to a message made on the WeChat account. It went on to say that the account had “violated” government internet restrictions but didn’t elaborate. It also didn’t say which post prompted the ban. Hong’s Weibo (WB) account, which has over 3 million followers, was also deactivated. A search for Hong’s Weibo account by CNN Business yielded a notice claiming that the user “no longer exists.” Lockdowns because of Covid have put a toll on the world’s second-largest economy. According to the most recent government assessment statistics, manufacturing and service activity is at its lowest level since February 2020.
In recent months, Beijing’s zero-Covid policy, combined with a crackdown on Big Tech, a real estate collapse, and dangers associated with Russia’s war in Ukraine, has generated an unparalleled outflow of cash by foreign investors. The Chinese currency has hit a 17-month low.
In recent days, Chinese officials have reassured the public that the economy would be fixed. President Xi Jinping, last Tuesday urged for a spending spree on infrastructure to boost development. On Friday, the Politburo of the Communist Party announced “concrete steps” to aid the internet economy. Requests for comment on the social media suspensions were unanswered by Hong and BOCOM International. Weibo, on the other hand, did not respond. Hong isn’t the only one worried about China’s economy and markets.
According to the Financial Times, Shan Weijian, the founder, and head of Hong Kong-based private equity company PAG has lambasted the government for measures that resulted in a “severe economic catastrophe.” A request for comment from PAG also went unanswered.
As public outrage over Covid lockdowns grows, Chinese officials have increased their inspection of social media. Weibo stated last month that it will begin publishing IP addresses on users’ account pages and when they make any comments, to fight “bad conduct.” Since 2021 Chinese tech firms have cracked down hard on anyone who makes disparaging remarks about the economy.
After the government initiated a crackdown on internet content, which seems to be damaging to the economy, Tencent terminated over 1,400 WeChat accounts in October. Tencent said the accounts made gloomy predictions about financial markets, “distorted” economic policy interpretations, and disseminated falsehoods. Chen Guo, the top strategist at Shenzhen-based Essence Securities, has a public account among them. It’s unclear which of Hong Hao’s postings prompted the most recent suspension. His most recent reports on WeChat were headlined “Be aware of capital flight” and “What should Chinese ADRs be concerned about.” ADRs (American Depository Receipts) are securities issued by Chinese companies that are listed in the US.
In those online posts, Hong cautioned about foreign investors selling Chinese equities, highlighting the pandemic’s worst capital outflow. He also attributed the massive sell-off in Chinese ADRs in March to China’s anti-tech crackdown rather than new US laws on foreign company listings. He also projected that the Shanghai Composite will fall below 3,000 points. In another message dated March 21. Last month, the Shanghai Composite dipped below 3,000 for the first time in 21 months, as mounting Covid-19 cases in Beijing raised concerns that Beijing may follow Shanghai and other major cities into lockdown. As per Refinitiv Eikon, China’s stock market has been the world’s second-worst performer this year, trailing only Russia.