Ottawa, February 13, (Kubha News) – As nations worldwide unveil their economic blueprints for the year ahead, all eyes are on the economic powerhouses of the world – the United States, Europe, and China. While the U.S. witnesses improvements in the dollar and labor market, and Europe recovers from the economic repercussions of the COVID-19 pandemic and the conflict in Ukraine, China is grappling with a precarious economic situation.
In recent weeks, China has faced disconcerting economic indicators, with its government debt repayment rate reaching a two-decade low. The real estate sector, a significant pillar of the Chinese economy, has experienced a substantial setback, evident in a 34% decline in housing sales in January compared to the previous year. Last month alone, nearly $33 billion worth of houses were sold, signaling a significant upheaval in the housing sector, and raising concerns about declining purchasing power among Chinese citizens.
Adding to the economic challenges, Afghanistan has strengthened its diplomatic relations with China, ushering in a new era of collaboration. Despite this burgeoning connection, China has taken an unprecedented stance by accepting the credentials of the Taliban ambassador without formally recognizing their government.
Throughout 2023, China faced internal economic crises, prompting a closer examination of its future economic outlook. Given China’s substantial regional influence and its role as a significant neighbor to Afghanistan, the economic trajectory of the country bears global implications.
President Xi Jinping voiced his apprehension about the direction of the Chinese economy, warning that without the implementation of new programs, domestic economic challenges are likely to escalate. Despite the International Monetary Fund’s prediction of a 4.6% growth rate for China in the upcoming year, the Chinese government has set a more ambitious target of 5%, leading to sweeping changes in economic plans.
Economic analysts foresee a challenging year for China in 2024, pointing to decreasing domestic consumer demand and an uptick in savings as factors eroding China’s economic hegemony. The impact of reduced demand is particularly pronounced in the housing sector, where major construction companies are facing downturns, causing significant delays or complete collapses of domestic projects totaling hundreds of billions of dollars.
In 2023, the Communist Party of China and the government led by Xi Jinping aimed for a 5% economic growth target. Though Beijing lagged behind until October, the announcement of new economic policies injected tens of billions of dollars in loans—an unprecedented austerity measure in China’s economic policy over the past 50 years. However, the housing sector continues to grapple with a substantial collapse and recession, presenting a formidable hurdle to recovery in this nearly $1 trillion-a-year industry.
Initiatives undertaken by the Chinese government at the beginning of 2023 to address housing issues, including significant loans to real estate companies, were followed by a mid-year budget overhaul and new lending policies. This abrupt shift compelled banks to deny loans to housing companies, resulting in a housing market catastrophe. Major companies went out of business, struggling to repay loans, leading to a decline in public trust in housing and construction entities. Banks, in turn, faced challenges and stagnation in loan repayment. Despite government efforts to avert a banking crisis through public borrowing, the economic imbalance in supply and demand remains, necessitating extensive time, a trillion-dollar investment, and restoration of public trust for a comprehensive recovery in the housing sector.
The primary objective of these initiatives is to address the declining sales of Chinese products within the region and to effectively compete with emerging markets, particularly in India and various Southeast Asian countries. These regions have demonstrated an increasing capability to manufacture diverse products at prices more competitive than China’s.
Pakistan, Iran and Uzbekistan are doing the same thing in relation to Afghanistan and they are worried about the increase in the level of domestic production in Afghanistan and they think that this has a direct impact on their production market and the Afghan market is becoming saturated with its domestic production. These nations are concerned that the rising Afghan domestic production may directly impact their markets, with a growing apprehension that the Afghan market is nearing saturation with its domestically produced goods.
The countries of the region are happy that negative inflation continues in Afghanistan. The continuation of this trend, both positive and negative, in an abnormal state, damages the country’s economy and domestic production, and causes a lack of liquidity and an increase in imports instead of exports.
Saturday, December 28, 2024
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