By India Today News Desk: World Bank President Ajay Banga, who visited India recently, said India has an excellent opportunity to become an alternative to China in manufacturing. However, Banga also mentioned that India does not have 10 years to grab the opportunity and that it has a limited window of three to five years to capitalize on it.
Even if companies do not completely leave China, they will also look to manufacturing in other countries, in order to strengthen the supply chain.
In this situation, Banga advised that India needs to seize the opportunity to become an alternative to China with determination and enthusiasm.
This was Banga’s first visit to India after taking over the helm of the global lender. He attended the G20 Finance Ministers and Central Bank Governors Meeting in Ahmedabad.
Indian-American Banga, 63, took over as the President of the World Bank in June, making him the first person of color to head either of the two global financial institutions, the World Bank and the International Monetary Fund.
India is currently holding the presidency of the G20, an intergovernmental forum of the world’s major developed and developing economies.
Meanwhile, here are the challenges China’s economy is facing.
MARKET DIP IN CONSUMPTION
The strict Covid-19 lockdown in China for three years has resulted in a significant reduction in consumption and has also led to a downtrend in the labor market.
Data shows one out of every five youths in China is unemployed and companies are unable to offer jobs due to the decline in consumer demand.
Furthermore, the real estate crisis in China has created significant difficulties. Many real estate projects in China are now incompetent and developers are facing challenges due to a decline in demand.
To tackle this situation, China’s central bank has decided to extend the loan repayment deadline for developers.
However, despite these efforts, rescuing the real estate sector is not easy and many major real estate companies in China have sunk.
DEFLATION AND DECLINE IN EXPORTS
Deflation has become a significant problem for China’s economy. With prices not increasing for months, people are hesitant to make purchases, resulting in a decline in demand for goods.
Companies are finding it difficult to produce goods due to the reduced demand and, in turn, have either stopped hiring or have laid off employees.
Some companies have even resorted to offering heavy discounts on their products, thereby reducing their profits.
Furthermore, the global economic slowdown has left a big dent in China’s growth, particularly due to its dependency on exports.
There has been a decline in demand for Chinese goods in many countries, including the United States and Europe. In June, China’s exports experienced a consecutive decline for two months.
Moreso, tensions with the United States have created troubles for China, which have also resulted in economic losses in Beijing.
The US is continuously working to reduce its dependence on China.
STUCK IN DEBT CRISIS
Due to the ongoing global economic slowdown, the number of companies defaulting on their debt payments worldwide is rapidly increasing. It is estimated that these companies carry a heavy burden of debt, exceeding 500 billion dollars.
The situation is expected to worsen in the coming days. Consequently, this debt crisis is continuously intensifying. Many of China’s companies are also facing defaults due to the distress in their real estate sector.
Considering the trapped debt in various sectors, the real estate sector in China accounts for approximately 168.3 billion dollars of loans.
Following that, the telecommunications sector has 62.7 billion dollars of debt, the healthcare sector has 62.6 billion dollars, software and services have 35.5 billion dollars and the retail sector has 32.6 billion dollars of debt.
The rest of the sectors account for 228.2 trillion dollars. Over the next few years, a debt payment of 785 billion dollars is due.
(Inputs by Aaditya Rana)