Xi Jinping’s dysfunctional economy: the fiscal deficit soared to 9% of GDP in 2022 and will reach 8% next year
The IMF estimates that the financial deficit of the Asian giant would have represented 9 points of the product at the end of this year, and the estimates of the Central Economic Work Conference of China conclude that the fiscal hole will continue without major changes during 2023.
The Chinese economy shows clear signs of slowdown and even stagnation in real activity. The manufacturing industry registers the lowest growth in the last 30 years in the country, and real sales in retail trade accumulate a collapse of 3% since January.
China lost the long-term growth trend on its main economic indicators: GDP, exports, retail sales and manufacturing activity. The shock caused by the pandemic in 2020, and later the incipient financial and real estate crisis, put the growth goals proposed by the Communist Party in check.
The International Monetary Fund estimates that China’s consolidated financial deficit will end 2022 at 8.9% of GDP, after having reached 6.1% in 2021 and up to 9.72% in 2020. The fiscal imbalances of the country deepened since the impact of the pandemic, but even before its arrival it already reached the most important dimensions of the last 4 decades.
Xi Jinping‘s 10-year administration led the country to the most drastic level of public spending since 1982, a jump of almost 6 points in GDP compared to the level of expenditures in 2012.
Fiscal imbalances multiplied 20 times during the dictator’s administration, a fact resulting from the aggiornamento of the official ideology of the communist regime under what is known as “Xi Jinping Thought”, in contrast to the successful reforms of Deng Xiaoping.
The lack of fiscal responsibility is not even a concern for the regime, since even China’s official bodies do not bother to admit this course. The China Central Economic Work Conference, which determines the economic and financial guidelines of the Communist Party Committee each year, presented the economic program for 2023 along these lines.
The Conference confirmed that the Xi Jinping administration will undertake an aggressive policy of fiscal and monetary stimuli for the year 2023. For the regime, the increase in public spending and the fiscal deficit will be the main “growth engine”. The financial imbalance of the State is estimated at 8% of GDP by the official authorities themselves.
Further cuts are projected for the People’s Bank of China’s monetary policy rate, which has already stood at a nominal 3.65% per annum since mid-August. A GDP growth rate of only 2.06% is budgeted for 2022 and 4.3% in 2023.
If the growth data for 2022 is confirmed after the result of the fourth quarter of the year, the Chinese economy could grow less than countries such as France, Spain, Italy, Portugal, the United Kingdom, Belgium, Sweden, Finland and South Korea, among many others. This scenario seemed completely unusual in the last decade, but “Chinese rates” have disappeared today.
With information from La Derecha Diario
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief