China’s economy is haunted by the prospect of a downward spiral, which leads experts to warn of an unprecedented challenge in several decades.

According to a U.S.-based news outlet, China’s economy is affected by repeated COVID pandemic lockdowns, plus sluggish demand from both inside and outside the country.

China’s National Bureau of Statistics just released the purchasing managers’ index (PMI) for November, which showed the index was 48, down 1.2 percentage points from October.

This is the lowest PMI reading since April. An index reading below 50 reflects a contraction in manufacturing activities.

It also points to a tightening in the economic situation and a slowdown in production and business activities, mainly due to the recurrence of the COVID-19 pandemic.

Zhou Maohua is a macro researcher in the financial market department at China Everbright Bank.

In an interview with China-based 21st Century Business Herald, he said that the main reason for the decline in the manufacturing PMI for the second consecutive month is insufficient demand.

On the one hand, Zhou said, the COVID pandemic has disrupted normal production as well as people’s lives, which has inhibited domestic demand.

On the other hand, the decline in new orders in the PMI indicates obvious signs of weakening external demand.

Dong Tao is vice chairman for Greater China at Credit Suisse Private Banking, Asia Pacific. 

He said that China’s economy is facing a challenge unseen in 20 years, but the country’s panacea from the past bailout is no longer effective.

He explained that, in the past, the Chinese regime’s macro management was about controlling its credit gate. When the economy overheated, it closed the credit gate. When the economy was moderate, it opened credit for everyone, so the economy could soon rebound.

But this time is different. Dong said that after the credit gate was opened, enterprises still didn’t have confidence in the system and they are unwilling to take out loans.

This is a reversal of the macro management model seen over the past decades.

According to Dong, China’s COVID measures cannot be eased soon, and the country’s housing market crisis has not yet been resolved.

The Credit Suisse executive pointed out that in the past China’s economy was mainly driven by real estate. However, since the crackdown measures were launched, the real estate capital chain has broken and debt has increased significantly.

Dong said that now the real estate problem is dragging down the economy.

As property developers face a cash crunch, it has brought great pressure to the entire financial sector.

Dong said that the recent measures to rescue the real estate sector show a change in the tone of the policies, but these measures are more about saving finance than about saving the property sector.

He said that the real estate crisis is now at the heart of China’s economic problems, and it is even possible that the risk will spread to the entire economic system.

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