From: lessgovt@gmail.com   
      
   A Crisis of Confidence Is Gripping China’s Economy   
   By Daisuke Wakabayashi and Claire Fu, Aug. 25, 2023, NY Times   
   Earlier this year, David Yang was brimming with confidence about the prospects   
   for his perfume factory in eastern China.   
      
   After nearly three years of paralyzing Covid lockdowns, China had lifted its   
   restrictions in late 2022. The economy seemed destined to roar back to life.   
   Mr. Yang and his two business partners invested more than $60,000 in March to   
   expand production    
   capacity at the factory, expecting a wave of growth.   
      
   But the new business never materialized. In fact, it’s worse. People are not   
   spending, he said, and orders are one-third of what they were five years ago.   
      
   â€œIt is disheartening,â€� Mr. Yang said. “The economy is really going   
   downhill right now.â€�   
      
   For much of the past four decades, China’s economy seemed like an   
   unstoppable force, the engine behind the country’s rise to a global   
   superpower. But the economy is now plagued by a series of crises. A real   
   estate crisis born from years of    
   overbuilding and excessive borrowing is running alongside a larger debt   
   crisis, while young people are struggling with record joblessness. And amid   
   the drip feed of bad economic news, a new crisis is emerging: a crisis of   
   confidence.   
      
   A growing lack of faith in the future of the Chinese economy is verging on   
   despair. Consumers are holding back on spending. Businesses are reluctant to   
   invest and create jobs. And would-be entrepreneurs are not starting new   
   businesses.   
      
   â€œLow confidence is a major issue in the Chinese economy now,â€� said Larry   
   Hu, chief China economist for Macquarie Group, an Australian financial   
   services firm.   
      
   Mr. Hu said the erosion of confidence was fueling a downward spiral that fed   
   on itself. Chinese consumers aren’t spending because they are worried about   
   job prospects, while companies are cutting costs and holding back on hiring   
   because consumers aren†  
   ™t spending.   
      
   In the past few weeks, investors have pulled more than $10 billion out of   
   China’s stock markets. On Thursday, China’s top securities regulator   
   summoned executives at the country’s national pension funds, top banks and   
   insurers to pressure them to    
   invest more in Chinese stocks, according to Caixin, an economics magazine.   
   Last week, stocks in Hong Kong fell into a bear market, down more than 20   
   percent from their high in January.   
      
   From its resilience to past challenges, China forged a deep belief in its   
   economy and its state-controlled model. It rebounded quickly in 2009 from the   
   global financial meltdown, and in spectacular fashion. It weathered a Trump   
   administration trade war    
   and proved its indispensability. When the pandemic dragged down the rest of   
   the world, China’s economy bounced back with vigor. The Global Times, a   
   mouthpiece for the Chinese Communist Party, declared in 2022 that China was   
   the “unstoppable miracle.†  
   �   
      
   One factor contributing to the current confidence deficit is the prospect that   
   China’s policymakers have fewer good options to fight the downturn than in   
   the past.   
      
   In 2018, with the economy in a trade war with the United States and its stock   
   market nose-diving, Xi Jinping, China’s leader, gave a rousing speech.   
      
   Mr. Xi was addressing an international trade fair in Shanghai and sought to   
   quell the uncertainty: No one should ever waver in their confidence about the   
   Chinese economy, despite some ups and downs, he said.   
      
   â€œThe Chinese economy is not a pond, but an ocean,â€� Mr. Xi said. “The   
   ocean may have its calm days, but big winds and storms are only to be   
   expected. Without them, the ocean wouldn’t be what it is. Big winds and   
   storms may upset a pond, but never    
   an ocean. When you talk about the future of the Chinese economy, you have   
   every reason to be confident.â€�   
      
   But in recent months, Mr. Xi has said little about the economy.   
      
   Unlike past crises that were international in nature, a convergence of   
   long-simmering domestic problems is confronting China — some a result of   
   policy changes carried out by Mr. Xi’s government.   
      
   After the 2008 financial crisis, China unleashed a huge stimulus package to   
   get the economy moving again. In 2015, when its real estate market was   
   teetering, Beijing handed out cash to consumers to replace run-down shacks   
   with new apartments as part of    
   an urban redevelopment plan that gave rise to another building boom in smaller   
   Chinese cities.   
      
   Now, policymakers are confronting a far different landscape, forcing them to   
   rethink the usual playbook. Local governments and businesses are saddled with   
   more debt and less leeway to borrow heavily and spend liberally. And after   
   decades of    
   infrastructure investments, there isn’t as much need for another airport or   
   bridge — the types of big projects that would spur the economy.   
      
   China’s policymakers are also handcuffed because they introduced many of the   
   measures that precipitated the economic problems. The “zero Covidâ€�   
   lockdowns brought the economy to a standstill. The real estate market is   
   reeling from the government’s    
   measures from three years ago to curb heavy borrowing by developers, while   
   crackdowns on the fast-growing technology industry prompted many tech firms to   
   scale back their ambitions and the size of their work forces.   
      
   When China’s top leaders gathered in July to discuss the rapidly   
   deteriorating economy, they did not deliver a bazooka-style spending program   
   as some had anticipated. Coming out of the meeting, the Political Bureau of   
   the Chinese Communist Party    
   presented a laundry list of pronouncements — many rehashed from previous   
   statements — without any new announcements. It focused, however, on the need   
   to “boost confidence,â€� without detailing the measures that showed   
   policymakers were ready to do    
   that.   
      
   â€œWhether you have confidence in the Chinese economy is actually whether you   
   have confidence in the Chinese government,â€� said Kim Yuan, who lost his job   
   in the home decoration industry last year. He has struggled to find another   
   job, but he said the    
   economy was unlikely to worsen significantly as long as the government   
   maintained control.   
      
   Confronted with dwindling confidence, the government has fallen back on a   
   familiar pattern and stopped announcing troubling economic data.   
      
      
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