DUBAI, United Arab Emirates – China is facing a confidence deficit as its economy undergoes a massive transformation and worries about an ongoing housing crisis grow, a senior banking executive told the World Government Summit in Dubai.
“To me, the biggest problem in China is a lack of confidence. Outside investors have a lack of confidence in China, and domestic savers have a lack of confidence,” Bill Winters, chief executive of emerging markets-focused Standard Chartered Bank, said on Monday. told CNBC’s Dan Murphy during a panel discussion.
“But I think China is going through a major transition from the old economy to the new economy,” Winters added. “If you visit the new economy, which many of you have experienced – and I’ve experienced it – it’s booming, absolutely booming, with double-digit growth rates, everything around electric vehicles, the entire supply chain, sustainability Everything related to finance and sustainability, etc. ”.
Investors are closely watching China, where stock market volatility, deflation concerns and real estate woes are clouding global growth prospects. According to a report completed by the International Monetary Fund in late December 2023, China’s demand for new housing is expected to drop by about 50% in the next 10 years.
The report said that reduced demand for new homes will make it more difficult to digest excess inventory, “extend the adjustment time to the medium term and put pressure on economic growth.”Real estate and related industries About 25% accounted for China’s gross domestic product.
International Monetary Fund Managing Director Kristalina Georgieva stressed in an interview with CNBC in Dubai on Sunday that she believes Beijing needs to reform to deal with economic challenges.
Georgieva said the international bank had discussed with China “long-term structural issues that China needs to address.” “Our analysis shows that without deep structural reforms, China’s growth may fall below 4%. This will be very difficult for the country.”
“We would like to see the economy really shift more towards domestic consumption and less reliance on exports… but for that, (they need) consumer confidence,” she said, echoing Winters’ sentiment on domestic confidence the opinion of. “This means repairing real estate, establishing a pension system and long-term improvement in China’s economic fundamentals are all necessary.”
Meanwhile, Standard Chartered’s Winters is ultimately optimistic about the world’s second-largest economy, noting that every society undergoing a major economic transition inevitably experiences some degree of turmoil and growing pains.
“They’re trying to make this transition without disrupting the financial system, which in the West we’ve never been able to do,” the CEO said. “Every major industrial transition has had a severe depression associated with it, Or the global financial crisis. They’re trying to avoid that, which means it’s going to be dragged out. I think they’ll get through it pretty well.”
—CNBC’s Evelyn Cheng contributed to this report.
