Property market

With the impact of the pandemic putting pressure on local government budgets across China, the latest wave of salary reductions for civil servants has taken hold in Shanghai, with no quarterly bonuses given out in some cases. China’s financial capital has not been doing well since the two-month pandemic lockdown took a heavy toll on businesses and general operations. Can the city recover?

The seemingly unending lockdown in Shanghai has taken a toll on investor confidence, leading to some entrepreneurs and companies talking about leaving the city. Zaobao’s Shanghai correspondent Chen Jing surveys the short-term reactions and long-term outlook of China's top financial city.

China is currently dealing with its worst Covid outbreak since the start of the pandemic in 2020. It is aso facing the "triple pressures" of shrinking demand, disrupted supply and weakening expectations. The central government has introduced new policies and measures such as tax cuts for businesses, the easing of property market restrictions, and providing support for local governments' infrastructure investment, but analysts are expecting a bumpy road ahead for China's economic growth.

Despite many Chinese provincial-level regions reporting higher-than-expected revenues in 2021, some lower-level governments struggled with budgetary constraints. A gloomier budget outlook this year could add to woes all round and hurt local governments' capacity to finance investments and repay debts.

China’s Two Sessions annual meetings commenced this week amid the Covid-19 pandemic and Russia’s invasion of Ukraine. The government work report delivered by Premier Li Keqiang outlined the key theme of “stability first” for China's economic growth and geopolitical outlook. Despite some calls for an armed reunification with Taiwan, Zaobao correspondent Yu Zeyuan says that nothing can distract China from its priority for stability, as it progresses towards building a modern China by 2035 amid challenges in its internal and external affairs.

An overhaul in its social value orientation is needed if China is to tackle the pressures on employment and social structures that the digital economy, artificial intelligence and smart automation will bring. Essentially, it should root out casino capitalism and the related social ills of “winner takes all”, “get rich quick”, “lying flat” and envy that have seeped into society. The Chinese Communist Party is making an effort but it will not be easy to abandon a purely material approach and prize other values that will raise the quality of life and elevate a civilisation.

Chuang Hui Liang warns that an egg shortage in Taiwan is indicative of rising inflation in Taiwan, which is currently held in check by the DPP government freezing price hikes on oil and electricity. But the huge losses due to this policy are only building up and one cannot say how long it can last. Harder times may be ahead for the Taiwanese who are tightening their belts and turning to property as a hedge against inflation.

Local governments in China are facing a problem of not having enough in their coffers, leading to various measures such as a hiring freeze in Hegang city. Corruption also remains a problem, with some officials using their authority and influence to line their own pockets. Zaobao correspondent Yang Danxu notes that there is a danger of such debt issues becoming a risk to social stability.

Even as the pandemic created greater demand for internet companies like Kuaishou, Alibaba and Meituan, these companies are finding their large staff numbers unsustainable, leading to a wave of major retrenchments over the past year or so. This is not just due to overexpansion, but also operational pressures that come with new regulations to protect employment rights. Zaobao journalist Meng Dandan reports.