The People’s Republic of China is the second-largest economy in the world and is responsible for a quarter of global GDP growth in this millennium; therefore, when the country contracts a cold, the rest of the world takes notice.
China’s post-pandemic recovery and global economic growth are in jeopardy as a result of an onslaught of negative economic news over the past several months.
In this visualization, we examine six key indicators that point to a slowing Chinese economy. National Bureau of Statistics of China, People’s Bank of China, and General Administration of Customs data are used to determine what is glaring red.
China’s annual GDP development rate has averaged 9 percent since 1978, when Deng Xiaoping opened the country to the global market.
However, growth appears to have slowed to a crawl, falling to 0.8% (quarter-over-quarter) in the second quarter of 2023, as a result of weakness in the Tertiary Sector, which includes retail expenditure and troubled real estate. This follows a more robust 2.2% growth in the first quarter, which was spurred by the release of pent-up demand following the end of COVID-era lockdowns.
The annual growth rate of China’s gross domestic product was 6.3%, which was lower than the expected 7.3% rate.
In July, exports experienced a decrease of 14.5%, marking the third consecutive month of declines and reaching lows that had not been seen since February 2020. Imports, on the other hand, were down 12.4%, which reflected the cautious mentality of consumers.
Exports to China’s three largest consumers, ASEAN, the EU, and the United States, all had year-over-year declines in the range of 17.4%, 15.1%, and 20.8%, respectively, when viewed from a regional perspective.
There was, however, one bright spot: exports to sanction-plagued Russia grew by 51.8%; nonetheless, this was not even close to being enough to counterbalance the general declining trend.
3. Consumer Price Index
The consumer price index entered into deflationary area for the first time since 2021, with prices falling 3% year-over-year. This marked the first time that the CPI has gone into this zone since 2021. The reduction was driven mostly by the Food and Tobacco Industry, Transportation and Communications, and Household Articles and Services.
During the same time period, the prices that producers paid for industrial products (referred to as the PPI) decreased by 4.4% (year-over-year), marking the tenth month in a row with a negative reading.
4. Youth Unemployment
And while the headline unemployment rate stayed unchanged in August 2023 at 5.3%, up slightly from 5.2% the previous month, it merely covers up major weaknesses for urban youth who are between the ages of 16 and 24.
The urban youth unemployment rate reached 21.3% in July, which was the highest ever reported in the country. As a result, the National Bureau of Statistics of China decided to postpone the release of any further statistics related to this topic.
5. Yuan vs. USD
Offshore trading on August 16, 2023 saw the yuan hit a new low against the U.S. dollar, bringing it to a level not seen in the previous 16 years. This is not surprising given the constant flood of negative economic data.
It was seen that large state-owned Chinese banks were buying up yuan on offshore money markets in an effort to maintain the stability of the currency. At the same time, the difference between the fixed exchange rate that was set by the People’s Bank of China and the rate that was used overseas grew to be greater than one thousand basis points.
6. New Loans
According to the most current numbers published by the government, people have borrowed less money, which contributes to the pessimistic outlook regarding the economy.
In July, the amount of newly issued bank loans dropped to ¥346 billion, compared to ¥3.05 trillion in the previous month. This was the lowest reading since late 2009, and it was less than half of what economists had anticipated, which was ¥780 billion.
Recently, the journal Foreign Affairs published an article with the daring title “The End of China’s Economic Miracle,” which argued that China’s problems could present an opportunity for the United States.
And despite the fact that this may be somewhat early, the Middle Kingdom is currently dealing with a number of critical structural difficulties, the most of which are the result of their own actions. Some of the most significant obstacles include government restrictions placed on the technology industry, a real estate market that is in freefall, an escalating debt crisis, and a declining population.
In spite of urging customers to spend more money and accusing western media of participating in “cognitive warfare,” it does not appear that the government will take any significant action to address the situation at this time.
It should come as no surprise that consumer confidence has sunk to such a low level. At the very least, we have reason to believe that: the Chinese government has ceased releasing that.