AlwaysFree: China GDP Growth Outlook Sputters To 3.3%, Threatening Global Economy

• Weak consumption spoils earlier signs of recovery

According to Nikkei Asia article published on November 16, 2022, the Chinese economy is on track to expand by 3.3% in real terms this year, according to the latest QUICK FactSet survey of private-sector analysts, indicating that growth will be much slower than anticipated and weigh on the global economy.

The updated forecast represents a 1.8-point downgrade from the estimates at the start of the year. China has an official annual growth target for gross domestic product set at around 5.5%.

The zero-COVID lockdowns in Shanghai in spring battered the national economy, and signs of recovery that emerged in summer have once again faltered.

In October, total retail sales fell 0.5% on the year, according to data released Tuesday by the National Bureau of Statistics. This is the first such contraction since May.

Restaurant industry income, which accounts for a tenth of the total, fell 8.1% on the year. Income from consumer electronics and apparel were down as well.

Consumption has continued to be soft in November. Between the beginning of the month through Friday's Singles Day -- China's unofficial online shopping holiday -- home delivery volume sank 11% nationally.

Alibaba Group Holding, which originated Singles Day, took the unprecedented step of not disclosing sales figures from that period, a move echoed by other online retailers.

China's housing market is in a malaise due to tighter regulations, and recovery is not expected in the foreseeable future. In October, home sales by square meters declined by more than 20% from a year earlier.

Real estate occupies 30% of GDP. The housing slump has spilled over into stunted sales of appliances and furniture. The production of construction material is not gaining momentum.

Global GDP has grown 90% from 2001, when China joined the World Trade Organization, through 2021. During that period, the Chinese economy expanded by a factor of 5.3 and contributed 31% to the global economic growth. In contrast, the U.S. contributed 10% to global growth.

The looming anomaly to the global economic engine in China casts a cloud over the global economy. In Japan, orders for machine tools shrank for the first time in two years in October, according to the Japan Machine Tool Builders' Association.

Receding demand from China is visibly affecting commodity prices. The nearest futures contracts for iron ore dipped below $80 per tonne at one point on Nov. 1 on the Singapore Exchange, plumbing a low not seen since February 2020.

Iron ore prices are a leading indicator of China's economic conditions since the country accounts for roughly 70% of the global trade volume for the commodity.

Even energy prices that had rallied sharply during the summer are showing signs of weakening. West Texas Intermediate (WTI) petroleum futures now hover around $85, or nearly 40% from the peak marked right after the Ukraine war started.

China's imports of crude oil by volume have declined year-on-year for four straight months since June, at around the same time WTI prices started to trend downward.

Spot prices for Asia-bound liquefied natural gas are now about 60% less than August's peak. China's reduction of LNG procurement has applied downward pressure on market prices.

During the 2008 global financial crisis, China authorized a massive stimulus package, maintained economic growth and supported the larger international economy. Now conditions have evolved to the point that no single country or region is fulfilling that role.

According to S&P Global, China's composite purchasing managers' index has fallen below the boom-or-bust line of 50 points for two consecutive months from September. PMIs for the U.S. and the Eurozone have been below the 50-point threshold for four straight months since July.

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