Unlike other major economies that bounced back quickly from the pandemic-induced stoppages, China’s recovery has been sluggish: consumer spending and confidence in the economy is much lower than what was predicted. As a result, many businesses have struggled and this has significantly impacted both domestic and global operations and strategies.
The property market, a pillar of economic success in the Chinese economy, was hit particularly hard. Major property developers, like Evergrande and Country Garden, have defaulted on their massive debts. This has led to an accumulation of unfinished projects, and consequently, plummeting property values.
However, the struggle of businesses is evident across a range of other sectors too. The construction, cement, and steel industries have experienced significant financial strain. Retail and e-commerce companies, like Alibaba and JD, are facing declining consumer spending and rising operational costs, driven by inflation and supply chain disruptions. China’s manufacturing and technology sectors have encountered an overcapacity, despite state efforts aimed at promoting development in AI, electric vehicles, and robotics. This has led to inefficiencies in the market and ‘wasted’ investments.
Moreover, the tech sector is facing the brunt of geopolitical tensions. Amid concerns over advanced technology uses in China, the US has implemented further restrictions on semiconductor imports and other critical technology, like quantum computers. The US is attempting to throttle China’s tech industry with curbs on advanced chips. This is forcing Beijing to spend more and more on chip development. Causing an opportunity cost for other possible investments to improve the business sector.
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