Why China may struggle to escape stagnation

livemint.com:

lockdown that had confined them to their dorms, sometimes ten to a room, for weeks on end. Zhengzhou has become one of China’s most problematic cities. GDP per person in Henan province, of which it is the capital, sits at 27% below the national average.

The city’s difficulties—including a lack of work, falling property prices and banking instability—are acute examples of those facing China at large. They also emerged earlier than those in much of the rest of the country. As such, Zhengzhou has become a laboratory for potential remedies, some of which have since been rolled out on a national level.

China’s recent economic data, released on September 15th, indicates that the economy is at least starting to stabilise. The annual rate of growth in industrial production rose to 4.5% in August. Retail sales were up by 4.6%.

Both beat analysts’ expectations. But the floor total area of new homes under construction fell by 7.1% in the first eight months of the year, continuing its decline. And even if the situation has begun to stabilise, Zhengzhou’s experience shows how hard it will be for China to truly escape from its economic malaise—and how long any recovery will take.

The region’s troubles began to accelerate in 2020, with the default of Yongcheng Coal, a local energy firm. The next year floods swept the city, submerging a metro line and killing almost 400 people. Local officials, including the party secretary, were sacked for hiding the true number of casualties.