Last month, China’s central bank cut short-term interest rates to 1.9% from 2%–the first rate cut since August 2022. There is a hint that Chinese authorities may introduce a bigger monetary stimulus package to revive the economy. With exports falling by 12.4 %, home sales tumbling, factory activity struggling to gather pace and unemployment rate among youth crossing all past records to touch 20.8% in May, the Chinese economy is sputtering on all major fronts. Accentuating woes of Chinese people is unfavourable news on the foreign investment front. According to Nikkei Asia, China could corner just $42.5 billion FDI between July and December 2022, constituting a 73% decline on the year. In 2023, despite making all efforts to woo investors, China was able to receive $39.71 billion worth of FDI in January and February this year. And then, continuous increase in the local
government debt has thrown cold water on the country’s move to inject fresh life into the ailing economy. At the end of May 2023, as per South China Morning Post, local government debt jumped to almost 38 trillion yuan ($4.8 trillion). Yet more worrisome is the ‘hidden debt’ amassed by a vast number of local government financing vehicles (LGFVs), the Hong Kong-based English newspaper said. LGFVs are companies created by local governments in China to borrow from banks, trusts or the bond market to finance roads, bridges, and other construction activities. Quoting the latest
International Monetary Fund (IMF) report on China’s economy, the Hong Kong-based daily said the debt of the country’s LGFVs surged to a record 66 trillion yuan (about $8 trillion) at the end of 2022. That is equivalent to half of China’s GDP. The rapid pile up of local governments’ debt, fall in exports and manufacturing sector and woeful condition of the real estate market, have raised concerns about the Chinese economy. Not less worrisome is its impact on the society which is already seething with deep frustration, a sign of which was reflected in the November-December protests by people. Thousands of Chinese students across several universities in the country came out in the open to vent out their anger against the government over Covid-19 restrictions. While they plastered social media with pictures and videos of protests, they rented the air with anti Xi Jinping slogans. This development shook the ruling Chinese Communist Party leadership as it happened even as lots of censors are placed on any kind of antigovernment demonstrations in the country.
Experts say there is no guarantee public protests will not take China into its octopus grip again as the decelerating economy has been particularly devastating for youth. One in four 16-to-24-year-old youth, as per Bloomberg News, in urban areas are now unemployed, while those in jobs in some provinces are facing delayed or cut in their salaries. In private companies, owners are cutting jobs to save their money. Ford Motor Co has reportedly cut more than 1,300 jobs as its sales have declined
in the world’s biggest car market. According to CNBC, Ford’s wholesales in China fell below half a million units for the first time in a decade in 2022. LinkedIn, the social media network owned by Microsoft Corp has offered pink slips to 716 staff in China as demand has wavered. In early May, CNN quoted California-based company’s CEO Ryan Roslansky as saying in a letter to employees that the decision was made on account of shifts in customer behaviour and slower revenue growth.
Chinese telecom equipment provider ZTE announced 20% layoffs as part of cross-cutting measures. Xiaomi, one of China’s largest smartphone makers, has cut thousands of jobs across multiple divisions, including its smartphone and internet business units, CNN said. According to AlixPartners, a global consulting firm, 17% of mainland companies in China have already laid off thousands of
employees since March this year. A particular disturbing phenomenon is that China’s middle class is bearing the brunt of the country’s economic slowdown. The South China Morning Post says a typical Chinese middle-class lifestyle includes a new flat by taking out fat loans, and sending children to
expensive private schools. All this has suddenly become unachievable due to job cuts and lacklustre economic performance. Analysts fear that if the deteriorating economic situation is not addressed soon, China may face social and political unrest. In June 1989, Chinese authorities had ruthlessly stamped out peaceful protest; hundreds were shot dead by PLA troops in and around Beijing’s Tiananmen Square. However, those were the days of non-smartphones and social media. Nor was the geopolitical situation as fractious as today. As such, it is feared that China would land in soup if simmering public anger against the ruling CPC takes a mass shape and throws the whole country out of gear. As per a Freedom House report, in four months—between June and September 2022— 668 incidents of protest and other forms of dissent were reported from China. Last year in July, hundreds of depositors in central China’s Henan province staged protests after four rural banks froze millions of dollars of deposits. Even though their demand to return their life savings was met with violent crushes by Chinese authorities, their demonstrations were described as the largest ones in China in the post pandemic period. What is bewildering even the hardcore supporters of China’s Communist regime, is Chinese people’s tenacity to speak against any injustice; they are doing so fearlessly despite concerted efforts to control and silence their voices by the government. They let their pent- up anguish out in the streets, on banners, walls, cyberspace—collectively and at times, individually too. Despite the risk of arrest and prosecution, 61 demonstrations were carried out against corruption, abuse of power and corporate fraud across 17 provinces and 35 cities in China in June 2022, said a report by DW News. These developments show China is sitting on a powder-keg, and a mere rise in public anger due to unemployment and economic woes, could snowball into a mass revolt against the ruling dispensation.