Sluggish growth and high unemployment: China’s crisis deepens

Lorenzo Bagnato

19 January 2024 - 13:00

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In 2023, China’s economy severely worsened, with both internal and external challenges

Sluggish growth and high unemployment: China's crisis deepens

China shows sluggish growth for 2023, growing below expectations and confirming a disappointing post-COVID recovery. Economists now fear a future “lost decade” for the Chinese economy, similar to Japan in the 2010s.

The Chinese GDP grew by 5.2% in 2023, above the government’s 5% target but below market expectations. In 2022, China’s economy expanded only by 3%, as COVID restrictions were still enforced in several major urban centers.

In the last quarter of 2023, China’s GDP also grew by 5.2%, missing the 5.3% forecast by Reuters.

Beijing also started posting unemployment figures again. It had stopped last year as youth unemployment had reached a record 21.3% in June.

However, Beijing now shows significant progress with youth unemployment falling to 14.9% in December, though it remains worryingly high.

Another negative data point released in January showed the Chinese population shrank by 2 million people in 2023. This points to a worsening demographic situation for China, as its working population keeps aging and approaching retirement.

Competition with the United States

China is the world’s second-largest economy, but economists now predict it will never pass the United States as the richest nation on the planet.

After the COVID pandemic, and especially in 2023, the United States showcased massive growth despite record-high interest rates. The US economy grew by 5.2% in the third quarter despite interest rates at 5.5%. Chinese interest rates have remained negative for the entire year.

Contrary to China, the US population keeps growing (mostly thanks to immigration). According to the US Census Bureau, the US added over 1.75 million citizens in 2023.

Furthermore, inflation in the United States remains steady around the 3% mark, not exactly on target but significantly lower than in previous years.

On the other hand, the Chinese economy keeps worsening, with declining trading activity, deflation, and a real estate collapse.

The housing market represents almost 30% of China’s GDP but is in a prolonged state of crisis after the collapse of market giants like Evergrande and Country Garden. Some analysts say China built more homes than people, with most remaining unsold.

The rising geopolitical tensions in Europe and the Middle East also worsen the isolation of China. Its manufacturing output declined last year, as external demand plummeted.

The question of whether China will overcome the United States remains open. The economic route, however, appears to be closing. The military option is seemingly the only way left to challenge the current world order.


# China

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