China’s economy is ‘booming,’ but it’s being held back by a lack of confidence, Standard Chartered CEO says

Xi Jinping makes a public pledge of allegiance to the Constitution at the Great Hall of the People in Beijing on March 10, 2023.

Xie Huanchi/Xinhua via Getty Images

China’s economy is transitioning from an old to newer one, Standard Chartered Bill Winters told CNBC.
The country’s new economy is actually booming into double-digit growth rates, though confidence doesn’t reflect this.
China is letting the transition drag out to avoid financial system disruptions.

China’s current burdens are evidence of a major economic transition that is being stretched out, and the country would benefit from a boost in confidence, Standard Chartered CEO Bill Winters said on Monday.

“I think China is going through a major transition from old economy to new economy. If you visit the new economy, which many of you have — I have — it’s booming, absolutely booming, well into double-digit growth rates,” he told CNBC during a panel discussion at Dubai’s World Governments Summit. 

Winters cited examples of a promising economic expansion, including China’s electric vehicle dominance, as well as the growth of sustainability-related finance and industries.

Yet, neither domestic savers nor foreign investors are demonstrating high confidence in China’s potential — the biggest issue the country will have to overcome, he said.

Offshore investors have dropped out of the country’s equity markets in large numbers, spurring a $7 trillion decline since 2021. Analysts who are considerably less optimistic than Winters have warned that this could be a permanent withdrawal. 

Confidence has been strained from multiple angles. Beijing’s tough crackdown on the country’s emerging tech sector has not sat well with investors, while crashing conditions in its property market are prompting panicked traders to leave.

A healthy real estate industry is central to the country, as it makes up 70% of household wealth and around a quarter of Chinese GDP. While the current issues are the result of too much debt in the sector, it’s not helped by lacking consumer confidence. 

Since the pandemic, domestic consumers have focused aggressively on saving, weighing down on the country’s growth and the world’s only deflationary economy. 

Some expect that a major stimulus push from Beijing authorities will revive confidence and provide households with incentives to spend, but China has yet to respond with such force. So far, solutions have included interest rate cuts, limited stimulus boosts, and looser rules on property ownership.

“They’re trying to manage this transition without disrupting the financial system, which in the West, we’ve never managed to do,” Winters said. “Every big industrial transition has had a major depression associated with it, or global financial crisis. They’re trying to avoid that which means it gets dragged out. I think they’ll get through the back end just fine.”