China counters economic meltdown with US$44bn rescue package

Beijing has announced a US$44bn stimulus to shore-up confidence in China’s economy, which is suffering the effects of a serious property sector downturn and president Xi Jinping’s stifling zero-Covid policies, reports the FT.

The State Council added US$44bn in credit support by its policy banks, the state-controlled institutions used by Beijing to spur economic growth, according to a recent official announcement.

“This will expand effective investment, boost consumption and help keep economic activities on a steady course,” said Chinese premier Li Keqiang, who has overall responsibility for the world’s second-biggest economy.

The FT reports that analysts see the measures as affirmation that the Chinese state is looking to combat the effects of the coronavirus pandemic on the economy.

project44 data lays bare economic hit of China's Covid policy

Data from supply chain visibility specialist project44 highlights the economic problems faced by China, whose zero tolerance approach to Covid is further disrupting already struggling supply chains.

project44 data shows that, in May, import dwell times in Shanghai were up 195% compared to May 2021. The increase was a result of restrictions in the hinterland and a backlog of import containers, as carriers and shippers sought to reposition boxes ahead of the reactivation of Chinese production facilities. 

project44 says that trucking companies, intermodal, port, and terminal operators worldwide are bracing themselves for a return to the ‘new normal’ of delays and gridlock at the gates if Chinese factories continue to go offline.

And it’s not just Covid that is the problem for China; ongoing drought is also having a devastating effect on the Chinese economy.

China is currently experiencing its worst heat wave in 60 years. The heat has exposed river and lake beds across the country, prompting the central government to declare its first national drought emergency of the year. This has seen the hydropower-reliant south of the country forced to ration energy by shuttering factories.

According to Reuters, scorched regions in south-west China extended curbs on power consumption on August 22. Such power rationing is already beginning to affect already overstretched global supply chains, reports Fortune.

The FT reports that many analysts are concerned “over the deep structural risks posed by a meltdown of the Chinese property sector”, which accounts for nearly one-third of gross domestic product. 

Fears over hordes of cash-strapped property developers, including Evergrande, which has liabilities of more than $300bn, have stunted the economy’s recovery from the initial shock of the pandemic.