“The virus situation remains a risk,” analysts at Capital Economics said. “New infections have risen again. Even if the current outbreak is contained, the zero-Covid strategy means that targeted lockdowns will remain commonplace, depressing consumer activity and spending.
“The slow progress in expanding vaccination in the elderly means that the zero-Covid policy will not be abandoned any time soon.”
In a bid to calm markets, China’s central bank cut interest rates for the second time this year, despite fears of rising inflation. The People’s Bank of China cut two key rates, though Craig Botham, chief China economist at Hall of Fame
Macroeconomics indicates that this decision will do little to support consumer spending, as there is simply no appetite to borrow.
The People’s Bank of China cut interest rates [we] imagine because they felt like they had to be seen to do something, rather than because they think it will have a lot of effect,” he says.
“Availability of funds is not the problem, but demand for loans. Likewise, the price of credit is unlikely to be the deciding factor, especially with interbank rates so low.”
An even greater concern is the growing number of young people who cannot find jobs. A world where policymakers continue to toggle economic activity on and off has created uncertainty among businesses. Many cannot be sure how many employees they will need today, let alone a year from now.
About 11 million Chinese graduates have entered a highly uncertain job market this year, pushing youth unemployment to 19.9%, the highest level in years.