From China comes discouraging new language. Leaders described their faltering economy as showing a “wavy pattern” with “bumps during progress.” Put politely, the message is that the country would not provide the lift for the global economy that was widely anticipated six months ago. It might even be a drag, a role to which Beijing and the world are unaccustomed. We should get used to it.
Who is the world expected to rely on? The much-maligned US, often derided over the past decade as being in its sunset years relative to its economic challenger. A retreat in inflation is likely to mean that an anticipated interest-rate hike by the Federal Reserve on Wednesday would be the last for a while. When it comes to China, the debate is about how much growth would slow, whether the country would suffer from deflation and how much action is needed to turn things around — or, at least, prevent a further deterioration.
The odds of a US recession in the next 12 months are fading, according to a National Association for Business Economics survey. A resilient labor market and buoyant consumer confidence underpin that view. Beyond US shores, the situation is more nuanced: Surveys of purchasing managers in Europe painted a bleak picture. Conditions are improving in some key Asian economies, albeit from a low base. Singapore unexpectedly dodged a recession in the second quarter. Revisions might yet show the city-state’s GDP slipped after a first-quarter contraction. Growth in South Korea is improving modestly after its GDP shrank late last year.
China stands out for the discord between expectations and performance. At the start of the year, it was a reasonable bet that the dismantling of “zero COVID-19” would unleash a robust recovery at home that would, in turn, lift everyone — and certainly Asia. Beijing’s growth target of about 5 percent was criticized as too low. Now, after months of disappointing data, it appears that China would be lucky to hit that goal. Hopes for a massive stimulus keep coming, only to be dashed. Barclays PLC and Bank of America Corp are among the firms to recently shave their forecasts for expansion.
The top decisionmaking body does seem to have become more concerned about the waning recovery, based on a statement after a meeting on Monday.
Nevertheless, officials are still expected to hold off from any large-scale stimulus. They are mindful of debt risks and the dangers of juicing the economy too much, but the approach is conservative to a fault.
The IMF is far too courteous to haul China over the coals. In a cautiously upbeat revision to growth forecasts unveiled on Tuesday, the lender projected the global economy would expand 3 percent this year, a touch above the prior 2.8 percent forecast. It is good news that the outlook is headed in the right direction, though the estimate remains below the 3.5 percent lodged last year. (The IMF retained its prediction that China would expand 5.2 percent. The US got a slight upgrade to 1.8 percent. Germany’s economy is expected to go backwards.)
Much of the credit for the brighter scene can go to the US. The IMF praised authorities for averting a broad banking crisis after tumult in regional lenders in March. Washington also got a nod for an accord to lift the debt ceiling and head off a potential default. Whatever happened to the cottage industry that was regularly updating us on when China’s economy would surpass the US? Pretty quiet on that front lately.
Perhaps people need to stop thinking of China as the would-be savior of the global economy. That requires an adjustment that goes beyond moving a few forecasts up or down a touch.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was executive editor of Bloomberg News for economics. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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