China’s biggest problem is lack of confidence: Standard Chartered CEO

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DUBAI, United Arab Emirates – China is facing a loss of confidence as its economy undergoes a major transition and concerns grow over its ongoing property crisis, a top banking CEO said on stage at the World Governments Summit in Dubai.

“China’s biggest problem to me is a lack of confidence. External investors lack confidence in China and domestic savers lack confidence,” Bill Winters, CEO of emerging markets-focused bank Standard Chartered, told CNBC’s Dan Murphy during a panel discussion Monday.

“But I think China is going through a big transition from the old economy to the new economy,” Winters added. “If you visit the new economy, which many of you have – I have – it’s booming, absolutely booming, in double-digit growth rates and everything EV-related, the whole supply chain, sustainable finance and everything related to sustainability, etc.”

Investors are keeping a close eye on China, whose rising stock market, deflation problems and property woes are casting a shadow over the global growth outlook. According to an International Monetary Fund report due at the end of December 2023, demand for new housing in China is set to drop by nearly 50% over the next decade.

Declining demand for new housing will make it harder to absorb excess inventory, “prolonging the adjustment over the medium term and weighing on growth,” the report said. Property and related industries About 25% share of China’s gross domestic product.

IMF chief: China must show determination to make economic reforms

IMF Managing Director Kristalina Georgieva, speaking to CNBC in Dubai on Sunday, emphasized what she saw as the need for reforms from Beijing to stem its economic challenges.

The international lender has discussed with China “long-term structural issues that the country needs to address,” Georgieva said. “Our analysis shows that without deep structural reforms, growth in China could fall below 4%. And that would be very difficult for the country.”

“We really want to see the economy moving more towards domestic consumption and less dependence on exports … but for that, [they need] Consumer confidence,” she said, echoing Winters’ sentiments on domestic confidence. “And that means fixing real estate, putting the pension system in place, as well as these long-term improvements in the fundamentals of China’s economy, are necessary.”

Standard Chartered’s Winters, meanwhile, is ultimately optimistic about the world’s second-largest economy, pointing out that every society that undergoes a major economic transition inevitably experiences some level of turmoil and growing pains.

“They are trying to manage this transition without disrupting the financial system, which in the West, we have never been able to do,” the CEO said. “Every major industrial transition has a major recession or global financial crisis associated with it. They’re trying to avoid that which means it drags on. I think they’ll go through the rear end.”

— CNBC’s Evelyn Cheng contributed to this report.

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