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China’s Economy Faces Challenges Despite Latest Moves to Stimulate Growth

China’s Economy Faces Challenges Despite Latest Moves to Stimulate Growth

HONG KONG—China’s recent steps to adjust Covid-19 controls and revive activity in the beaten-down property market stirred hopes that Chinese leader

Xi Jinping

is putting fresh emphasis on measures to support the economy, potentially leading to a strong rebound in growth next year.

But economists warn the moves so far haven’t amounted to a broad shift in Mr. Xi’s policies, and the messaging out of the recent Communist Party Congress only reinforced that the Chinese leader planned to stick to his goals of achieving economic self-sufficiency and “common prosperity”—even at the cost of lower growth rates.

While China’s economy is expected to recover somewhat in 2023 after a major slump this year, most economists doubt it will return to the heady expansion of prepandemic days soon, if ever.

Western demand has been falling for Chinese exports, such as these at an export terminal in Jiangsu province.



Photo:

Cfoto/DDP/ZUMA Press

In the short run, demand for Chinese exports is falling as Western consumers cut spending. Some cities are restoring strict Covid-control measures as Covid cases spike, suggesting China’s path toward living with the virus will be bumpy. And home sales, dismal for months, continue to slump despite mortgage rate cuts and other measures to revive sentiment.

On Friday, China’s central bank said it would lower the amount of reserves banks must hold against their deposits to boost lending to households and businesses, but economists said the move would likely have limited impact given weak appetite for new loans.

In the longer term, China faces other challenges, including an aging population, high debt levels and pressure from the U.S., which is trying to restrict China’s access to semiconductors and other technologies.

As a result, “we believe China’s potential growth will be meaningfully lower than previously thought,” economists at Goldman Sachs wrote in a recent note to clients.

Although they predict China’s economy will bounce back some in the second half of 2023, as more…

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