Unemployment has been rising among the young, with authorities suspending data disclosures after youth unemployment crossed 20 per cent.
China’s economic recovery is weakening.
The latest numbers suggest sequential gross domestic product (GDP) growth of 0.8 per cent, though year-on-year numbers are better because of the base effect.
Annual growth rates have slowed down from over 9 per cent on average between 2000 and 2019 to around 3 per cent in 2022 (chart 1).
The country has previously depended on debt-fuelled infrastructure spending to power growth.
Indebtedness weighs heavier when growth slows down.
China’s general government gross debt is expected to cross 90 per cent of GDP in 2025 and 100 per cent in 2027, according to International Monetary Fund projections (chart 2).
Part of the current troubles are related to the real estate sector.
Two major players, Country Garden and Evergrande, have struggled with repaying debt.
Troubles in the real estate sector can have a significant impact on the economy, as it accounts for nearly a quarter of GDP (chart 3).
Larger structural worries also haunt China.
An ageing population that is growing slower than before is a headwind (chart 4).
Unemployment has been rising among the young, with authorities suspending data disclosures after youth unemployment crossed 20 per cent (chart 5).
All of this echoes what happened in its eastern neighbour earlier. Japan had a period of high growth followed by decades of low growth and deflation.
China’s consumer prices for July contracted by 0.3 per cent.
Similar levels have been seen around 2000, and in 2009 in the aftermath of the global financial crisis.
India is now more closely linked to China than either of those periods.
China’s share in India’s trade was around 2 per cent in the early 2000s, and 9 per cent around the global financial crisis.
It has averaged 11 per cent over the last five years (chart 6).
Feature Presentation: Ashish Narsale/Rediff.com
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