CEO of a $19 billion U.K. bank with business in Hong Kong since the Victorian age sees a ‘lack of confidence’ unraveling China’s economy

China’s struggling economy is down to a crisis of confidence. Take it from the head of Standard Chartered, the $19 billion London bank that’s plugged into the Chinese market (by way of Hong Kong).

The British lender, formed from the merger of the Chartered Bank of India, Australia, and China and Standard Bank of British South Africa, can trace its history in Hong Kong back to the Victorian era, in 1859. Even today, it’s one of only three note-issuing banks in the Hong Kong special administrative region, according to its website. And CEO Bill Winters believes the recent slide in the world’s second largest economy is the result of a lack of faith.

Both foreign investors and Chinese consumers are reluctant to put their money into the country after more than a year of declines in its economy, as Winters sees it. “China’s biggest problem to me is a lack of confidence,” he said on Monday during a panel at the World Governments Summit in Dubai. “External investors lack confidence in China, and domestic savers lack confidence.”

Since the pandemic, when citizens were kept under severe lockdown restrictions beyond those in other countries, hampering consumer spending, China has not regained its economic footing. The country’s GDP grew only 3% in 2022, as COVID regulations were still in effect for much of the year; that number would be spectacular for a Western economy but far below the 8% rate from much of the previous two decades.

In 2023, things picked up with a 5% GDP growth rate, but experts say this belies the uneasy recovery that’s shaken the confidence of consumers and investors alike. In particular, China’s deflation rate of negative 0.6% in 2023 indicates that domestic supply of goods is outpacing demand. In January, the apparent deflation problem worsened, raising fears that falling prices are a sign of a weakening economy.

China is mainly an export economy, and that wasn’t helped by the global supply-chain struggles that made moving goods across the world difficult. Nor was it helped by the U.S.’s decision to reduce its reliance on Chinese suppliers as President Joe Biden has largely continued Donald Trump’s policies (although U.S. government officials have been careful to say the two countries are not “decoupling”).

In China, the transition hasn’t been without some difficulties for average people. Youth unemployment remains at an all-time high, hovering at 21% last summer, a number so bad the government then made the decision to stop reporting it altogether.

And the real estate sector, which grew for decades, driving the Chinese economic miracle, took a nosedive since the pandemic. Some people put down payments on homes that were still under construction—a common practice in China—only to find that the developers went belly-up, leaving them with a mortgage and no new house. The real estate crash culminated in the liquidation of China’s largest property developer, Evergrande, last month.

The Chinese government has been keen to trumpet new economic priorities in a bid to stave off wider turmoil. But Chinese consumers so far seem hesitant to pick up their spending habits. Many instead are keeping money in their savings, worried that their financial situation will only worsen in the near future. While those with investments in the stock market see the ongoing rout as a sign to cut their losses and move money to safer, more remunerative markets.

Can China shift to a new model without a recession—or worse? 

For Winters, the Chinese economy’s tribulations are the result of the country as a whole undergoing a widespread transition. “I think China is going through a major transition from old economy to new economy,” Winters said. “If you visit the new economy, which many of you have—I have—it’s booming, absolutely booming, well into double-digit growth rates and in everything EV-related, the whole supply chain, everything finance- and sustainability-related.”

Chinese officials have been open about their desire to transition the country to a new, consumer-driven economy.

“China’s economic growth model is moving from ‘investment+housing+export’–driven to ‘domestic demand+manufacturing+carbon neutrality’–driven,’” noted Chinese economist Zhu Min in November. “This is a long-term structural transformation.”

For Winters, China’s efforts to undertake such a drastic shift could leave its economy in the lurch.

“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.”

Despite the current upheaval, Winters still backs China in the future. “They’ll get through the back end just fine,” he said.

This story was originally featured on Fortune.com