Chinese economy has ‘come off the boil,’ deserves ‘caution’

Citigroup (C) CEO Jane Fraser, who leads the third-largest U.S. bank, said in a new interview that she expects sluggish short-term growth in the Chinese economy as the country continues to bolster domestic consumption and taper its reliance on exports. 

The bank approaches China with “caution” but remains bullish about the country’s role in global economic growth over the longterm, Fraser said.

“I think it’s come off the boil for sure, but I think bubbling away too ferociously isn’t great either,” she says. “We’re looking at it with some caution in the immediate term.” 

“But as we look in the longer run, it’s going to certainly be a major engine of growth for the world as it has been,” she adds. “The role China will play in the world is only going to increase in its importance, and [it’s] one we’ll all have to manage carefully.”

Fears of a slowdown in Asia have gripped the global economy after the release of disappointing third quarter GDP growth in China, where real estate woes and power shortages contributed to the nation’s weakest quarterly performance in a year.

The MSCI China Index (MCHI) has fallen 13% so far this year, while the S&P 500 (^GSPC) has risen 22% over the same period. 

Concern over ripple effects from the possible default of Chinese real estate giant Evergrande has prompted sell-offs across global markets in recent months. Evergrande, which faces more than $300 billion in debt, averted default for the second time with a bond payment on Thursday, The New York Times reported.   

Meanwhile, a recent Chinese crackdown on major tech companies like e-commerce giant Alibaba (BABA) and search giant Baidu (BIDU) has coincided with a new agenda from President Xi Jinping that promises “common prosperity” by addressing the nation’s wide wealth gap.

“[China] has taken some pretty impressive strategic shifts over the last decade when you think of the pivot to more of a consumer-oriented driver and more self-sufficiency of their growth as opposed to the dependency on export and infrastructure,” says Fraser.

“That does mean slower growth, and I think there’s some concern about overheating in China right now,” she adds.

Fraser, who took over as CEO in March, has undertaken a “strategy refresh” that includes a shift in the focus of the company’s operations to Asia.

Last month, the company’s commercial banking unit opened a China desk in Singapore meant to help small- and medium-size Chinese companies expand across Southeast Asia. 

Chinese flags are seen near the logo of the China Evergrande Group on the Evergrande Center in Shanghai, China, September 24, 2021. REUTERS/Aly Song

Chinese flags are seen near the logo of the China Evergrande Group on the Evergrande Center in Shanghai, China, September 24, 2021. REUTERS/Aly Song

But Fraser also noted the longstanding presence of Citigroup in China, emphasizing the commercial banking services the bank provides for multinational corporations with locations in the country.

“We’ve been in China, I think, almost just over 120 years, so we have seen China through many phases,” she says.

“We’re on the ground there and have a long history in the country, so that does help,” she adds. “There are many investors doing business on the ground there.” 

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Candice Cearley

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