Business Essentials for Professionals


Many In China Believe That The Country's Economy Is In A Recession

Many In China Believe That The Country's Economy Is In A Recession
Melody Zhang paced nervously up and down her dorm's corridor the night before China's civil service exam, practicing her responses. She did not aware she had been crying the entire time until she returned to her room.
Zhang had applied for more than a hundred jobs in the media business without success, and now he hoped to begin a career in official propaganda. She was not selected out of a record 2.6 million applicants vying for 39,600 government jobs in the midst of a young unemployment crisis.
"We were born in the wrong era," said the 24-year-old graduate from China's top Renmin University.
"No one cares about their dreams and ambitions anymore in an economic downturn. The endless job-hunting is a torture."
A lack of trust in the economy is preventing businesses and consumers from investing and hiring, which might lead to a self-feeding cycle that reduces China's long-term economic potential.
China outperformed most major economies last year, growing by 5.2%. However, the world's second-largest economy appears to be contracting to jobless grads, property owners who feel worse off as their apartments lose value, and workers who make less money than they did a year ago.
According to Zhu Tian, an economics professor at the China Europe International Business School in Shanghai, a developing nation investing about 40% of its output annually—twice the level of the United States—should not be classified as experiencing a recession according to the textbook definition, which calls for two consecutive quarters of economic contraction.
"We're in a recession," Zhu said. "If you talk to 10 people, seven will say we've had a bad year."
"I don't think the government can afford that. This cannot go on forever," he said, urging more stimulus measures to break out what could be a "vicious cycle" of low confidence that will affect young people entering the job market in particular.
In June—the final data point before the series was halted by officials—more than one in four of the approximately 100 million Chinese between the ages of 16 and 24 were unemployed. China started releasing the data again on Wednesday, omitting college students, and reported 14.9% young unemployment in December.According to polls, China's Generation Z is the most pessimistic age group.
Jobseekers' earnings fall short of their expectations as companies reduce expenses due to weak domestic demand. The average compensation that businesses in China's 38 largest cities provided decreased by 1.3% in the fourth quarter of last year, according to recruiter Zhaopin.
This represents a significant change in sentiment for an economy that has grown by almost 60 times in terms of dollars since the 1980s.
Large-scale expenditures in infrastructure and manufacturing were a major factor in this achievement, but approximately ten years ago, the model started to produce more debt than growth, and today China is struggling to service its entire debt.
In the meantime, China was training its students not for labour in factories or construction, but for highly skilled professions in the services industry. Their prospects have been reduced by decreased household demand and governmental crackdowns on the tech, banking, and education sectors.
Janice Zhang, 34, was optimistic that her expertise and U.S. education would help her find a new job when she quit her job in the computer business in late 2022 to attend to a family emergency.
Zhang, however, was only able to secure a job in social media marketing, where she was required to work 15-hour shifts, so she left the job soon after.
She claimed that the status of the economy makes her feel helpless, like a "grain of sand on the beach," with little power over her own fate.
"In China, this word 'aspiration' has been driving everyone, because they believed tomorrow will be the best time. What I'm trying to conquer in my life now is, in a way, healing the disappointment tomorrow is going to bring."
Shanghai's Vincent Li, the owner of a posh coffee shop, claims he was knocked out of the middle class by a one-two blow.
Chinese consumers choose cheaper coffee as they tighten their budgets. Additionally, the two apartments he purchased on the popular Hainan island in 2017 for 4 million yuan ($558,612) have not drawn any interest in purchase or rental activity in the last three years.
"The property market is saturated," Li said.
According to the most recent data from the central bank, 96% of China's approximately 300 million urban families had at least one flat in 2019. A tenth owned more, and a third owned two.
The majority of household savings—roughly 70%—are allocated to real estate.
According to real estate professionals, since the real estate market collapse started in 2021, the value of flats has dropped by two thirds in several cities, which has caused their owners to feel less fortunate and cut back on their spending.
At its height, the real estate market comprised about 25% of China's GDP, and it is currently viewed as a major danger to the country's efforts to break free of the middle-income trap.
"The big risk is that the fallout from diminishing old growth sources could become too large to contain and inhibit new growth sources. If that happens, China could become stuck in transition," said Yuen Yuen Ang, Alfred Chandler Chair of Political Economy at Johns Hopkins University.
The impact of domestic policy on Chinese living is not limited to that. Its first-ever foreign investment deficit is partly attributable to diplomatic tensions with the West over Taiwan, Ukraine, and the South China Sea.
Trade associations have expressed concern about a number of concerns, including departure bans and raids on consultancies and due diligence businesses.
David Fincher's Shanghai-based consultancy is unable to pursue business in cutting-edge semiconductors due to U.S. tech limitations on China, which shuts off a significant revenue stream.
He's thinking about going abroad because he thinks additional regulations from Beijing or increased diplomatic tensions may make running his business impossible.
"You feel like a lobster in a pot," Fincher said. "The water gets hotter and you just kind of sit there."
"I worry about Beijing as much as everybody else."

Christopher J. Mitchell

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