Beyond the data How much pressure is China’s economic slowdown?

China’s GDP growth rate for the second quarter of 2021, among other economic data, will be released on July 15. Before that, the Chinese authorities seem to have taken several actions to show that the pressure of China’s economic slowdown in the second half of the year is not small.

For example, “after more than a year, the authorities have again mentioned lowering the standard, and exceeded the expectation of mentioning full-scale lowering”. Shortly after the closing of the Communist Party’s Centennial Conference, the State Council proposed to lower the standard on the 7th, and two days later the Central Bank quickly announced that it would lower the reserve requirement ratio by 0.5 percentage point from the 15th of this month, which is equivalent to injecting long-term funds into the market by about 1 trillion yuan. The central bank officials said the three purposes of the cut: to optimize the capital structure of financial institutions, to enhance the capacity of financial services and to better support the real economy, which was interpreted by the official media as a continued optimistic view of economic performance.

However, from public reports, it is clear that before the news of this cut landed, voices in the market, including experts, scholars and research institutions, predicted the authorities’ monetary policy based on the “bright” data of the first quarter, and almost overwhelmingly believed that it would be a targeted cut. “trillion yuan, the surface is to stimulate the market, stimulate financing consumption, but the side reveals the majority of domestic enterprises financing difficulties, the harsh reality of the market downturn. This can explain both the decision-making senior actually on the second half of the economic downturn concerns have been very serious, but also that the first half of the economic optimism is not without false impression.

The Ministry of Commerce’s Assistant Minister Ren Hongbin said at the State Council’s regular policy briefing on July 12 that further targeted policies will be introduced to stabilize foreign trade and foreign investment. Before the central officials shouted this time, public reports show that in recent months, the whole country has taken multiple measures to “stabilize foreign trade and foreign investment”.

As we all know, in the first quarter of this year, China’s GDP growth rebounded to double-digit 18.3%, in addition to the low base effect, mainly relying on investment, import and export growth rate jumped high, of which, the export drive is particularly meritorious. But there is also a harsh reality behind this, that is, many coastal export processing enterprises have closed down or out of business, including the economy of the first major province, the first major foreign trade province of Guangdong.

The reason is that export enterprises “three mountains” – the exchange rate appreciation, raw material prices, the triple pressure of soaring shipping costs, squeezing foreign trade profits. Many foreign trade enterprises status quo in a nutshell is “although the order is not less, the settlement of the RMB less and less, 100,000 yuan loss of 72,000 yuan, freight costs rose nearly 5 times, a single dare not accept, dare not enlarge production capacity”. According to an investigation by China Economic Weekly in May this year, as “the more orders received, the more losses”, for these SMEs, the more serious problem is not difficult to finance expensive financing, but a self-help is “lying flat”.

In addition, “civil servants and teachers are cut bonuses and welfare benefits” news is very much in the news. Recently, the civil servants and teachers in many places have been rumored to cancel a series of bonuses such as performance appraisals, which have been issued to return. According to the internal documents and microblogging discussions exposed online, this seems to be a nationwide deployment. The signal of “tightening the belt to live a hard life” is very obvious, and indirectly proves that the treasury is financially difficult and the economy is really having some major problems.

Finally, it is worth mentioning that, since the top echelon of the Communist Party of China has proposed that the “internal circulation” of China’s economy should be the main focus, it is now starting to “target” civil servants and teachers, highlighting that the effectiveness of the “internal circulation” has not yet been achieved. The “inner circle” has already taken precedence. When the two most stable occupational groups in China have started to roll in, the hardships of the general public can be imagined, and the Communist Party’s declaration of “building a moderately prosperous society” has become an empty phrase.