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BofA’s downgrade of China’s growth outlook raises important concerns about the country’s economic health. With consumer confidence low and the property sector struggling, China's economy faces significant headwinds. Beijing’s cautious approach to monetary easing isn't helping, and this could have global consequences. China is a major driver of global growth. When its economy slows, the effects are felt worldwide—especially in markets dependent on Chinese demand. To avoid further drag on global growth, it’s crucial that China addresses these challenges with more decisive actions. As we watch these developments, it’s clear that China’s economic trajectory will be a key factor in shaping global economic trends in the near future.

From Opinion: Xi’s economic plan amounts to foisting an economic growth plan that worked two decades ago onto a China and global economy that have changed considerably.

The Chinese economy only grew 5% last year and the country faces a number of challenges to it’s economic growth potential and this article in The Economist discusses Xi Jinping’s potentially controversial plans to escape stagnation #stagnation #China #chineseeconomy #economicgrowth #EconomicRecovery #economy #economics #GlobalEconomy https://lnkd.in/dQ_d9w2Q

From Opinion: Xi’s economic plan amounts to foisting an economic growth plan that worked two decades ago onto a China and global economy that have changed considerably.

Has China's economy peaked? The apparent change of fortunes for the Chinese economy was so stark that a new term emerged about a year ago: "Peak China." The theory was that the Chinese economy was now burdened by many structural issues, such as a heavy debt load, slowing productivity, low consumption and an aging population. Those weaknesses, along with geopolitical tensions over Taiwan and a decoupling of trade by the West, sparked speculation that China's impending economic supremacy may be delayed, or never happen.China's total debts have widened to more than 300% of GDP. A large chunk is owned by local governments. Foreign direct investment has fallen for 12 months in a row, dropping 28.2% in the first five months of 2024 alone.? In the late 2000s, the private sector made up close to two-thirds of the Chinese economy, but by the first half of last year, that share had dropped to 40%. The state-run and mixed-owned sector has grown much larger. While China now has the most firms listed in the Fortune magazine's ranking of leading global corporations, those companies are much less profitable than their US counterparts, averaging profit margins of 4.4% compared to 11.3% for US multinationals. Chinese economists, meanwhile, point to the country's industrial production being larger than the US's. Last year's GDP growth at 5.2% was more than double the US growth rate. The idea of China's outstripping the United States to become the world's largest economy has been a fixation for policymakers and economists for decades. What will happen, they argue, when the US — one of the most dynamic, productive economies — is usurped by an authoritarian regime with a three-quarters-of-a-billion-strong workforce? By DW

China’s Economic Growth Faces Major Challenges in 2025 China’s rapid economic growth appears to be in the past as the world’s second-largest economy grapples with the fallout from its largest-ever real estate bubble. Consequently, China’s ambition to surpass the U.S. as the world’s largest economy may take decades longer than the Chinese government had anticipated. Since 2021, the collapse of the property market has led to an estimated loss of about $18 trillion in household wealth for Chinese families, according to Barclays. This loss surpasses the financial impact experienced by Americans during the 2008–09 financial crisis. Additionally, the heavy-handed approach of Beijing during the pandemic has contributed to why Chinese consumers are hesitant to spend freely. Current estimates suggest that there are approximately 80 million vacant housing units in China, which is equivalent to half of the total housing stock in the United States. Also, China is also facing significant demographic challenges, making it more difficult to rejuvenate its economy. The working-age population is declining, reversing the demographic advantage that fueled China’s economic rise. Moreover, the scale of debt and the challenges associated with servicing that debt in China are more severe than what the U.S. encountered before the financial crisis or Europe faced during its debt crisis a decade ago. In response to these economic challenges, leader Xi Jinping has directed investment towards China’s vast manufacturing sector. This strategy has resulted in increased industrial capacity but has also led to two years of declining prices for Chinese producers, who are now seeking international markets for goods they struggle to sell domestically. This situation is contributing to ongoing trade tensions. Reference: “Years of Excess Press China’s Economy“ The Wall Street Journal 2 Jan 2025 BY JASON DOUGLAS AND MING LI

The challenges highlighted regarding the Chinese economy are indeed significant and multifaceted. China's economic growth trajectory has been remarkable over the past few decades, but these challenges pose risks and require strategic responses. 1. Local Weaknesses: - Rising debt levels and overcapacity in industries can lead to financial instability and inefficiencies in resource allocation. - Environmental concerns are becoming increasingly pressing as China grapples with pollution, natural resource depletion, and the need for sustainable development. - An aging population poses challenges for the labor force, social security systems, and healthcare services. - Income inequality can lead to social unrest and hinder sustainable economic development. - Regional development disparities highlight the need for inclusive growth policies to bridge the gap between urban and rural areas. 2. Global Weaknesses: - Trade tensions and geopolitical risks, especially with countries like the United States, can disrupt global supply chains and impact China's export-dependent economy. - Economic downturns in key markets can dampen demand for Chinese exports and affect overall economic growth. 3. Strategic Weaknesses: - Economic planning and reforms are necessary to address inefficiencies, promote sustainable growth, and adapt to changing global economic dynamics. - Enhancing competitiveness, fostering innovation, and advancing technology are crucial for China to maintain its economic leadership. - Rivalries with other countries and geopolitical challenges require strategic responses to protect and enhance China's economic interests. 4. Long-Term Competition: - Countries like India and Vietnam are emerging as strong competitors in manufacturing and exports, posing a challenge to China's dominance in these sectors. - China needs to continuously innovate, upgrade its industrial capabilities, and diversify its export markets to stay competitive in the long run. In conclusion, navigating these challenges requires a comprehensive approach that addresses both internal and external factors, promotes sustainable development practices, fosters innovation and technological advancement, and adapts to evolving global trends. China's ability to effectively manage these challenges will be crucial for ensuring continued economic growth and stability in the years to come.

Understanding China’s Economic Crisis: A Structural Challenge China’s economy is facing a critical juncture. In her insightful piece,?"China’s Real Economic Crisis: Why Beijing Won’t Give Up on a Failing Model", Zongyuan Zoe Liu sheds light on the root cause of the stagnation:?overcapacity. Key takeaways: - Overproduction Problem: China’s industries—steel, solar panels, EVs—are producing far beyond demand, both domestically and globally. This leads to falling prices, rising debt, and "zombie companies" that survive only on government support. - Political Drivers: The Chinese Communist Party’s model prioritizes industrial production for political control, neglecting consumer spending and fostering inefficiencies. - Global Ripples: This overcapacity disrupts international markets, driving down prices, harming global competition, and increasing trade tensions with the West. - Resistance to Reform: Despite the clear need for balance between investment and consumption, Beijing clings to its model for political leverage and self-sufficiency. - What can the West do??Instead of isolation, Liu argues that integrating China into the global trade system is crucial. Collaboration through institutions like the WTO could encourage sustainable reforms while preventing economic escalation. The full article, published by?Foreign Affairs, offers a compelling analysis of one of the world’s most pressing economic challenges. What are your thoughts on this? Can collaboration pave the way, or is confrontation inevitable? Let's discuss below! #Economy #China #GlobalTrade #Policy #Business

As we usher in the Lunar New Year in China on February 10, it marks an opportune moment to delve into a comprehensive overview of the country's economic performance throughout 2023. Anticipating the challenges and opportunities that lie ahead in 2024 becomes imperative, especially amid the growing skepticism surrounding China's economic landscape. Short summary of the article: ?? Statistics reveal that China underperformed in just about every economic indicator in?2023. China's economy has been especially hit by the following factors: high youth unemployment, underperforming stock market, crisis on property market and a general lack of confidence in the economy prospects. ?? China's economy is not in a good shape and as of now, there isn't a reliable indicator signalling imminent improvement for investors. ?? In order to improve the flailing economy, President Xi Jinping’s administration has introduced a set of new initiatives in 2024, including measures to?attract foreign investors?and stimulate?domestic consumption. More details on these measures please see in the article. ?? According to some experts, China is currently grappling with the challenges associated with the middle-income trap theory, accompanied by systemic issues characterized by lingering deflationary trends, an ageing population, as well as increasing unemployment rate among young overqualified people. ?? It’s important to note that the fall of Evergrande has not mirrored the magnitude of Lehman Brothers’ impact on China, although the problem is serious. Another large real estate developer Country Garden is ramping up its domestic and overseas assets to raise cash for bond coupon payments. Squeezing prices down creates a deflationary effect on the real estate market. Forecasting China's economic trajectory for 2024 is inherently challenging. However, at least at the micro level, a discernible lack of confidence is evident among Chinese private SME. They prefer to save cash and wait. #china?#economy?#finance?#stock?#realestate?#evergrande https://lnkd.in/daHpE-RT

China's $18 trillion economy is decelerating. In July 2024, Chinese official data revealed that GDP growth was falling behind the government’s target of about 5%.? ? This bleak picture can be explained by a number of factors. These include China's sustained real estate crisis, its rapidly aging population, the tightening grip of Chinese leader Xi Jinping on the economy and his extreme response to the pandemic. Yet the current stagnation reflects a decades-long economic strategy, deeply rooted in the Communist Party's tradition of economic planning, which favors industrial production and infrastructure development at the expense of household consumption needs. ? The interconnectedness of the world's economies means that the health of China's economy has major implications for Western countries in terms of geopolitical stability and trade relations, market potential and investment opportunities, as well as environmental and health initiatives. #china #global economy #strategy