China’s economy facing ‘serious danger signs,’ this economist warns

There are “real danger signs” for the Chinese economy, which could even stall out in the current quarter, a top China watcher said late Monday.

China is facing difficulty, in part, because it can’t settle on a “coherent” COVID policy, and policymakers are wary of cutting interest rates, said Mary Lovely, who heads the China program at the Peterson Institute for International Economics.

Although there are conflicting reports, perhaps 87 Chinese cities are in lockdown or have some form of restraint due to the rem zero-tolerance policy toward the coronavirus.

Two drivers of growth have been consumption and net exports. “When we look at those two drivers going forward, we see some serious danger signs,” Lovely said.

“I think the bottom line is that the growth forecast in China will have to be downgraded again,” Lovely said.

China’s annual growth this year is likely to be “significantly lower” than the 5.5% growth target set by the Chinese government, she added.

China’s economy grew by 4.8% annualized in the first quarter, topping expectations of a 4.4% increase. But growth slowed in March and the country could experience a “growth recession” in the current quarter, Lovely said. A growth recession is when an economy grows but at such a slow pace that the unemployment rate rises.

As a result, China will not be the same engine of growth for the troubled global economy, Lovely said. Supply-chain woes are likely to be noticeable in the second quarter, she added.

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