China’s Economic Growth Slows to Decades-Low Rate
China’s economy has been facing a drastic slowdown in growth, slipping to one of its lowest levels in decades in 2023. The country has lifted all epidemic restrictions, but the housing downturn and weak consumer confidence have severely impacted the world‘s second-largest economy.
The annual growth rate of China’s economy in 2023 is predicted to be the weakest since 1990. This is due to the housing downturn and weak consumer confidence, which have been major contributors to the economic decline. Additionally, the pandemic’s impact on economic growth over the previous three years, when China was closed to the outside world, has further affected the economy.
China’s economic growth has fluctuated greatly over the past year, and external expectations have also been changing. The 5.2% growth rate in 2023 exceeded the government’s official target of around 5%. However, it may be challenging to maintain similar growth this year, especially as the global economy is expected to slow down. Demand for Chinese exports is softening, and Chinese families have faced financial difficulties without direct government support.
In the long run, China is dealing with a rapidly aging population, high debt levels, and a deteriorating external political environment due to worsening relations with Western countries led by the United States. Concerns have been raised that China could be trapped in a vicious cycle of falling prices and weak demand, similar to Japan in the 1990s.
Even though the Chinese government has introduced small-scale measures to address the economic decline, such as lowering key interest rates and encouraging banks to lend to troubled real estate companies, these measures have had little effect in reversing the downward pressure on the economy. Economists believe these measures may not be enough to reverse the economic decline, and the country’s stocks have fallen as a result.
The current economic slowdown has raised worries, and the hopes of a consumption recovery that emerged with the reopening after the pandemic have diminished. The country’s reliance on exports during the pandemic has decreased, with the economy now depending more on domestic demand.
China’s real estate industry data has also given rise to cautious approaches. New home prices in 70 large and medium-sized cities in China have accelerated their decline, and investments in real estate development have fallen significantly.
The overall unemployment rate has also risen to 5.1% in December, and the urban youth unemployment rate is a cause for concern, hitting 14.9%.
While China’s economy faces significant challenges, it still shows strength in the global supply chain for renewable energy products such as solar panels and electric vehicles, and its industrial added value grew by 4.6% in 2023.
Overall, the road to economic recovery for China seems unclear, as policymakers are reluctant to launch large-scale stimulus packages. As China is expected to announce a formal economic growth target at the National People’s Congress in March, it remains to be seen whether the country can overcome its economic challenges and restore consumer confidence.