Surviving in the World: The Causes and Implications of China’s Economic Woes
Welcome back to Surviving in the World (SIW), your newsletter written by students for those interested in global affairs. We always try to present select topics in global news in an easy-to-understand format.
Today’s letter covers the causes and implications of China’s economic woes.
Brought to you by: Elin Kim (’26).
Word Count: 311 / Time: 2 minute read.
The Causes and Implications of China’s Economic Woes
What happened?: Growth. Change. Life.
All was promised for the Chinese when its government lifted Covid regulations in late 2022. Economists around the world predicted an economic boom.
Chinese consumers are reluctant to spend (Source: Business Insider)
Those predictions, however, appeared to be false.
In September 2023, we see a China plagued by four crises:
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1) the real estate crisis
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due to years of overbuilding and excessive borrowing
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2) the debt crisis
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debt reached 282% of annual economic output
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due to unregulated borrowing to cover real estate/government expenses
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3) the employment crisis, and
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due to financial volatility (instability) from the zero-covid policies
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4) “a crisis of confidence” (NYT).
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fueled by the lack of faith in the economy → consumers reluctant to increase spending
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The country’s annual growth rate has fallen from its usual 8% to a meager 3%. Output in the second quarter (April - June) was only 0.8% of what it was in the first quarter (February - March).
Chinese consumers are reluctant to spend (Source: Business Insider)
What are its causes?
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The plunge in exports → declining demand for Chinese products
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The decline in housing prices → a result of overbuilding
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Failures to combat sociopolitical instability
Hence, Consumers worried about instability cut spending, and companies hold back on investments because consumers aren’t spending.
What are its implications?
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For China, → raises the potential for a period of severe economic slowdown
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For the US → “unlikely to hamper US growth” (NYT)
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Fallout is limited -- there are some upsides for American interests, but the effects are generally neutral
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Why should you care?: The turn in events suggests the potential for a large economic crisis within China.
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“Even on purely selfish grounds, we should worry about what the Chinese regime might do to distract its citizens from domestic problems” (NYT).
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