Structural economic issues and demographics will dampen future Chinese consumption and reduce the attractiveness of the country as a market and destination for investment, according to Patrick Artus, chief economist at Natixis, a French investment bank with a network of offices in Asia.
“Domestic demand will increase very little or even stagnate in China, owing to population ageing, rising household savings as a precaution against a weak pension system, and declining housing and corporate investment,” Artus said.
A pessimistic economic outlook for China will dent foreign investment, according to Artus, with investors faced with lower potential in China’s domestic market but also more immediate difficulties related to the country's COVID control policies, which have limited travel into and within China.
In a recently issued research report, Natixis listed countries which it saw as most impacted by weaker Chinese growth. Topping the list were Chile and Brazil, followed by Germany and key oil exporters. Southeast Asian exporters including Malaysia, the Philippines, Thailand, and Indonesia and New Zealand and Australia also made the list.
“The weight of exports to China is particularly high in Chile, Angola, Vietnam, Malaysia, and South Korea,” Artus said.
Internally, China’s GDP and retail sales have fallen off the country’s robust recent growth, which economists primarily blame on the country’s zero-COVID policy, with China President Xi Jinping reiterating his support for the policy at the recently concluded Communist Party Congress in October.
“China has this boot on the neck of economic activity, and we’re past the point where the boot made sense,” Center for Strategic and International Studies Freeman Chair in China Studies Jude Blanchette told The New York Times. “The problem is, the most authoritative voice continues to reiterate no change.”
Meanwhile, private businesses in China's catering sector have been alarmed by a purported plan by the Ministry of Housing and Urban-Rural Development to revive a state-run system of so-called "supply and marketing cooperatives" once prevalent in major cities. The ministry issued a statement denying such a plan was imminent or that it would put state-controlled entities in charge of distributing foodstuffs.
China President Xi Jinping has prioritized the building of grassroots community welfare services, welcome in a country where health and social services are threadbare in many regions.
Photo courtesy of Groupe BPCE
