Inflation in China last month was 0.2%, a significant improvement from more than 2% at the start of the year. But these figures are bad news from a Chinese perspective, Poldermans thinks. “The Chinese consumer is still very reluctant to spend money on a house or a car, for example.” He sees a total lack of faith in the future, both among the local population and in the national and international business community.
New variety
The icing on the cake is that a new variant of COVID 19 has been circulating in China since late April, Poldermans says. “Those things don’t help boost that economy. Many companies, both domestic and foreign, are freezing their investments and moving part or sometimes all of their activities to countries in the region.
The companies that depend on the Chinese market for their sales will remain, mainly chemical companies and automakers and manufacturers of advanced machines. “If those companies want to keep up with Chinese technology, they will have to keep investing.”
Unemployment
However, it doesn’t stop there when it comes to the accumulation of problems. China suffers from high youth unemployment. Many of them want to work for private companies or foreign companies. And that’s exactly what’s not good. “All these problems are preventing the Chinese economy from moving forward.”
The government is trying to regain domestic demand and consumer confidence. According to Poldermans, attempts to do so have had little effect. “Many promises have been made but few actions have been taken.”
Deep scars
Many companies are still feeling the effects of the heavy zero covid policy and its effects. “This has left deep scars on the Chinese economy.” China had about 44 million small businesses before the pandemic. They accounted for 80% of all jobs. “It has been decimated.”
Chinese authorities must take drastic measures to restore public support, Poldermans thinks. “All those widely felt frustrations with the lengthy and draconian measures surrounding Covid have not benefited President Xi Jinping.”