Over the past four decades, China has caught the eye of the world. For many years, China was averaging a 10% or higher GDP increase year after year. In the past decade, growth has decreased, but the Chinese are still raking in 6% GDP growth pre-COVID-19. COVID caused all of the world’s economies some hardships. Most of the developed world has recovered quite well. But China is facing something it has not faced in years: an economy that is slowing down. A poor housing market, youth unemployment, and weak unemployment are just a few reasons why the economy is slowing down. The question is, should the world be worried about China’s economy?
The Chinese economy may not be on the brink of collapsing. President Joe Biden said the Chinese economy is a “ticking time bomb,” while Xi Jinping had a more optimistic outlook, using words like “strong resilience. China has a population of over 1.4 billion and a GDP of $17.96 billion, with an estimated growth rate of 5.3% in 2023. Some sectors have been growing this summer as well, especially in areas of travel and leisure.
Cars, furniture, luxury purchases, and appliances were also up over the recent summer. Since COVID zero policies were wiped out, companies are looking to borrow more money to expand into new ventures. But with that being said, the Chinese economy has more issues than anticipated.
The issue discussed the most is the housing market. China has rapidly developed housing over the past two decades to fill its large population. Post-Covid, the developments came to a halt, but there was nobody to fill the complexes. Demand for housing dropped, causing prices to drop significantly. The Chinese homeowner is poorer, which in turn has decreased household spending.
Youth unemployment is high, with an estimated 21.3% of job seekers between the ages of 16 and 25 not having jobs. It is increasingly difficult for white-collar workers to get into government-controlled sectors like finance and science. China’s population issue will continue to worsen as the average age continues to rise and more citizens retire.
China has the potential to be the world’s largest economy. In recent years, Xi Jinping has put too many government restrictions on sectors because he wants complete control of the Chinese economy. This constraint will be the reason China eventually plateaus. Decreasing the government’s role in the economy will give a significant boost the Chinese so desperately need. The average annual income is still only $12,850. More privatization can create an economic boom the world has never seen before.
Although the Chinese economy is not on the brink of collapsing as many people may fear, Xi Jinping and his government have some work to do to bring it back to the growth it once saw in the decades before COVID.
Author: Joshua Cheatham
