JEDDAH: China’s economy is facing different challenges that may impact the country’s investment environment, said Neil Shearing of Capital Economics on Monday.
In a note, the group chief economist wrote that China’s “zero-COVID” approach seemed to be unrealistic given the spread of the delta variant.
“Whereas most governments are now starting to acknowledge that we are likely to have to live with the coronavirus for the long term, China’s ambition remains to keep it out of the country altogether.
That will be difficult if it can spread easily among a highly vaccinated population,” he wrote.
According to Shearing, without a change in its approach, China may have to continue with occasional lockdowns and restrictions on movement, which is likely to have an impact on consumer and business behavior in the world’s second-largest economy.
On the macro front, he said indicators are showing that China’s economy is slowing down. “The slowdown is a reminder that China’s long-term growth challenges haven’t gone away.”
Shearing said there is a growing unease about Beijing’s commitment to open and free capital markets. He cited the recent clampdown on the private education sector, which came on the heels of a crackdown on the ride-hailing firm Didi.
“A combination of slowing growth, deepening policy concerns, and recurrent flare-ups in the virus is likely to make for difficult terrain for investors,” Shearing cautioned.
