China’s looming confidence crisis makes it even harder to achieve 5.5% growth target

THE list of concerns facing China is getting longer. First, Beijing defanged its tech tigers such as Alibaba, Meituan and Tencent. It also removed the spiritual opium gaming from under-18s; battered the after-school tutoring sector to pulp; and defused what it perceived to be a potential time bomb in the over-leveraged real estate sector. Then, there is its unsustainable dynamic zero-Covid policy that has locked down entire cities; health code systems that double up as policing aid that stopped bank depositors in Zhengzhou, Henan, from protesting.

Now, concerns that the Henan bank scandal - which saw 40 billion yuan (S$8.3 billion) deposits disappear - may not be an isolated case. As if Beijing doesn’t have enough on its plate as it fights to boost its economy, news of mortgage defaults across 22 cities are threatening to smother any remaining spark of confidence left in the world’s second-largest economy, and disrupt order ahead of the crucial National Congress of the Communist Party.

Investors will be watching the data deluge coming out of China on Friday (Jul 15). Many economists are expecting the harsh lockdowns to hit growth in the second quarter. Estimates range from a 1 per cent contraction in gross domestic product (GDP) to a 1.5 per cent expansion on year. Performance will be mixed, with the external and housing sectors dragging all others.