China’s Economy Is Slowing. Here’s Why that Matters

This was meant to be the year China’s economy, unshackled from the world’s strictest Covid-19 controls, roared back to help power global growth. Instead, it’s facing a confluence of problems: Sluggish consumer spending, a shaky property market, flagging exports amid a US drive for “de-risking,” record youth unemployment and towering local government debt. The impact of these strains is starting to be felt around the globe on everything from commodity prices to equity markets. What’s worse, President Xi Jinping’s government doesn’t have great options to fix things. That’s sparked a discussion about whether the Chinese economy is headed for a Japan-style malaise after 30 years of unprecedented growth.

China’s official target is for growth of around 5% this year. In a world economy expected to grow a meager 2.8% in 2023, that doesn’t look too shabby at first glance. The reality, though, is that China was still under Covid Zero rules in 2022, which gives a low base for comparison. Netting out that effect, growth for 2023 will look closer to 3% — less than half the pre-pandemic average, Bloomberg Economics said. Gross domestic product grew at a slower-than-expected pace of 5.5% in the first half of the year compared with a year earlier, with consumer spending growth weakening notably and property investment contracting. Trade has been declining and, in July, China slid into deflation, signaling a worsening outlook for the economy.