The new pneumonia (CCP) vaccine has been inoculated in various countries, and the US Congress passed a US$1.9 trillion (about HK$14.82 trillion) stimulus package, which is expected to drive the global economic recovery. However, foreign media expect China’s vaccination progress lags behind that of Europe and the United States, and the high debt ratio seems to be a chronic poison. Some analysts say that China may face a long period of high debt in the future, becoming a stumbling block to economic recovery, how long China’s economic lead can last at the moment, is a cause for concern.
Strategists are trying to find indicators of economic recovery by calculating where China will be the first to reach the “herd immunity” threshold. But foreign media estimate that at the current rate of vaccination, it will take China five and a half years to achieve “herd immunity,” significantly slower than the U.S. and U.K., which are 11 and 6 months respectively.
If Western countries reach “herd immunity” earlier than China, it will be a major challenge to China’s economy if the blockade is lifted and countries in Europe and the US open up to each other one after another, which could reverse the current economic pattern. Louis Kuijs, an Asian economist at the Oxford Economics Institute, even said that if China does not speed up the vaccination process, it will affect economic growth in the coming years.
In particular, China has been “heavily indebted” in the last year to cope with the new pneumonia Epidemic. According to the Bank for International Settlements (BIS), China’s household debt surged by about US$380 billion (about HK$2.96 trillion) in the first half of 2020, almost four times the rate of the United States, and China’s household debt to gross domestic product (GDP) ratio rose by 3.9 percentage points during the period, an increase greater than most countries.
French foreign trade bank also published a report, pointed out that China’s debt burden last year because of the epidemic last year and soared, even though the current savings rate and economic account surplus high so that China’s outbreak of debt crisis opportunities are not large, the economy to maintain growth can make the debt growth rate gradually return to normal, but to reduce the debt to GDP ratio requires more stringent fiscal constraints, and corporate and household financing should be more cautious.
The bank continued to point out that China is likely to be highly indebted for a long Time to come, becoming a stumbling block to economic growth and inhibiting durable goods consumption and the business environment. In the future, in the face of unexpected economic shocks, high indebtedness will also limit the role of countercyclical measures. Analysis of the mainland even said that, in view of the high cost of housing and Education, people’s willingness to give birth to children may decline again, last year’s lowest births in decades, I am afraid that will become “the most in the next few decades in the year”.
Everbright Sun Hung Kai wealth management strategist Wen Jie pointed out that the second half of last year, although the mainland economy has seen a recovery, but also by industry and region. He also said that China’s debt default problem may surface in the future, because debt defaults have always had a delayed effect, of which the repayment capacity of domestic housing is worthy of attention, but the mainland has drawn “three red lines”, it is estimated that the authorities will not further tighten the policy, so as not to hit the recovering economy, but also do not see the possibility of relaxation.
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