UN downplays doom and gloom over Chinese economy

Concerns about China’s economic troubles are being exaggerated and Beijing still has plenty of fiscal headroom, the United Nations’ trade and development chief said Wednesday.

China’s ballooning property-sector crisis has seen several high-profile firms engulfed in debt, fuelling fears about the country’s wider economy and a possible spillover globally.

“We don’t share the very pessimistic projections about China,” said Rebeca Grynspan, head of the UN Conference on Trade and Development.

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UNCTAD lowered its 2024 China growth estimates from five percent to 4.8 percent, citing weak domestic demand.

“It’s a slowdown but it’s not something like the very pessimistic reviews that we have seen in some of the publications,” Grynspan told a press conference presenting UNCTAD’s flagship annual economic forecasts.

“We think that there is a slowdown of growth in China, but not a dramatic crisis.”

The former vice president of Costa Rica added that the country “has a lot of fiscal space, unlike other countries”, so Beijing still has the means in hand “to be able to rebound and to support the economy”.

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China’s property sector has long been a pillar of growth — along with construction it accounts for about a quarter of GDP — and it experienced a dazzling boom in recent decades.

But the massive debt accrued by its biggest players has been seen by Beijing as an unacceptable risk for the country’s financial system and overall economic health.

Authorities have gradually tightened developers’ access to credit since 2020, and a wave of defaults has followed — notably that of property giant Evergrande.

Richard Kozul-Wright, the director of UNCTAD’s Globalisation and Development Strategies division, was even more critical of the prevailing pessimism than Grynspan.

“You could have expected a faster recovery in China this year, and that hasn’t happened because of a number of strong headwinds in the real estate market,” he said.

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Furthermore, consumer demand has been much weaker than expected, he added.

“But we certainly don’t agree with the almost hysterical reaction some of the Western press has adopted towards China.”