In response to China’s disappointing economic performance, top leaders have recently issued urgent directives for new steps to boost consumer spending and shore up the ailing property sector. Nevertheless, the country is still exposed to high waves of economic risks. This is underscored by a troubling plunge in retail sales, which fell to a three-year low in November.
In November, retail sales growth plunged to a 15-year low, setting off panic buttons among Chinese political elites. Its decline is emblematic of far deeper rot within our economy. Even before the pandemic, the real estate sector, especially residential development, had faced a massive crisis. Selling prices are continuing to drop and buyers are experiencing diminished confidence. The government is keenly aware that it needs to move quickly to return stability to the market.
To better address these perennial challenges, China’s leadership has made increasing consumption a priority in recent years. The federal government is doing everything to foster a higher level of spending. They were intended to boost the local economy and offset the impacts of a cooling real estate market. This new approach is an attempt to level the economic playing field. Here, consumer confidence – a key driver of growth – is less significantly so.
At the same time, the government has set its sights on re-stabilizing the property sector. As most developers teeter on the edge of bankruptcy and homebuyers continue to be afraid to buy, leadership’s ongoing push is needed. Their goal is to combat this plague by making real estate transactions a safer endeavor. With these amendments, their aim is to reestablish consumer and investor trust.
The goal behind these initiatives is clear: manage the persistent economic risks that threaten to undermine China’s economic stability. The government is being quite aggressive to stimulate consumption and support the property sector. They want a stronger, more agile economy that’s better able to withstand the shock from external shocks.