DUBAI, United Arab Emirates – China faces a confidence deficit as its economy goes through a massive transition and concern grows about the ongoing real estate crisis, a senior banking executive said on stage at the World Government Summit in Dubai.
“The biggest problem China has, to me, is a lack of confidence,” Bill Winters, CEO of emerging markets-focused Standard Chartered Bank, told CNBC's Dan Murphy on Monday during a panel discussion. “Overseas investors lack confidence in China and domestic savers lack confidence.” They lack confidence.”
“But I think China is going through a big transition from the old economy to the new economy,” Winters added. “If you visit the new economy, which a lot of you — and I — are experiencing, it's booming, absolutely booming, reaching double-digit growth rates and everything around electric vehicles, the whole supply chain, everything in sustainable finance and sustainability, and so on. till then.”
Investors are watching China closely, as stock market volatility, deflation and real estate problems cast a shadow over global growth expectations. According to an IMF report completed in late December 2023, demand for new housing in China is expected to decline by about 50% over the next decade.
The decline in demand for new housing will make it difficult to absorb excess inventory, “prolonging the medium-term adjustment period and impacting growth,” the report said. Real estate and related industries constitute about 25% of China's GDP.
Speaking to CNBC in Dubai on Sunday, Kristalina Georgieva, Executive Director of the International Monetary Fund, stressed what she saw as the need for reforms from Beijing in order to stem the economic challenges it faces.
Georgieva said the international lender discussed with China “long-term structural issues that the country needs to address.” “Our analysis shows that without deep structural reforms, growth in China could fall below 4%. This will be very difficult for the country.”
“We want to see the economy move more towards domestic consumption, and rely less on exports… [they need] “Consumer confidence,” she said, echoing Winters’ sentiments about local confidence. “This means that property reform, putting the pension system in place, as well as these long-term improvements in the fundamentals of the Chinese economy, will boost consumer confidence.” Be necessary.”
Meanwhile, Standard Charters' Winters is ultimately optimistic about the world's second-largest economy, noting that every society going through a major economic transition inevitably faces some level of turmoil and growing pains.
“They are trying to manage this transition without disrupting the financial system, which we have never been able to do in the West,” the CEO said. “Every major industrial shift had a Great Depression associated with it, or a global financial crisis. They're trying to avoid that which means delaying it. I think they'll get through the back end just fine.”
— CNBC's Evelyn Cheng contributed to this report.
