A real estate crisis is at the heart of the concerns over China. Among the companies hit hardest recently is the Chinese real estate giant Country Garden, whose shares are trading well below one Hong Kong dollar. Another behemoth property developer, China Evergrande, sought bankruptcy protection in the United States on Thursday as it struggled to settle with creditors over tens of billions of dollars in debt.
Chinese stocks bounced after officials in December lifted the government’s extreme “zero Covid” measures that sharply curtailed economic activity. But hopes that China’s economy would show a sustained recovery faded as the country released a string of concerning economic statistics. Prices fell, raising the threat of deflation; retail sales and industrial production missed economists’ expectations; and real estate investments dwindled.
Exports, a cornerstone of China’s economy, have fallen. China’s currency, the renminbi, has sunk to its lowest level in years. A number of major banks have downgraded their forecasts for how much China’s economy will grow in 2023, to levels below the government’s target of about 5 percent. The most recent official numbers indicate that China was growing at an annual growth rate of about 3 percent.
China’s policymakers have responded with a series of measures aimed at encouraging consumers to spend more and banks to step up their lending. The central bank, the People’s Bank of China, has cut key interest rates to new lows. But the moves have done little to boost the confidence of investors or generate greater economy activity.