As Chinese economy slows, experts say there will be ‘problems for Beijing’
While the ‘export engine is running very hot’, jobs are lagging, squeezing spending in China. China’s economy slowed sharply in the quarter ending June, revealing
While the ‘export engine is running very hot’, jobs are lagging, squeezing spending in China. China’s economy slowed sharply in the quarter ending June, revealing vulnerabilities in the country’s growth model, which is predominantly propelled by exports with little appetite for domestic consumption, experts say. Gross domestic product (GDP) for the second quarter clocked in at 4.3 percent, the country’s slowest rate of expansion in more than three years, and lower than the 5 percent growth clocked in the previous quarter, despite a surge in exports driven by a boom in artificial intelligence and strong demand for Chinese electric vehicles. “These numbers reveal the story we’ve known all along, that there are essentially two stories here – there are areas of exports that are booming, but domestic consumption remains sluggish,” said Vina Nadjibulla, vice president at the Asia Pacific Foundation of Canada. June exports jumped 27 percent from a year earlier, even better than May’s increase of 19.4 percent, helping the world’s second-largest economy record a trade surplus of $125.6bn in June, up from $105.4bn the previous month. While that has helped propel the economy, it will “put pressure on China’s trading partners,” said Nadjibulla.
“Countries are already asking China to correct its trade imbalances and address their concerns.” At the same time, China has struggled to increase domestic consumption, especially as parts of the domestic economy – such as the real estate sector in which people had invested their savings – have collapsed in the past few years, wiping out savings and pushing consumers to spend less and save more. “Chinese consumers have been forced to tie their wealth to property,” said Juliet Lu, assistant professor in the School of Public Policy and Global Affairs at the University of British Columbia, a sector that had been built up on speculative investments and saw massive losses in the past few years. “Between that and the losses that occurred during the COVID-19 pandemic, people became very conservative in spending, Lu said. “Ordinary Chinese citizens have been squeezed. Cheap goods and exports come at the expense of Chinese workers,” she said. ‘Job creation is lagging’ Reza Hasmath, academic faculty adviser at The China Institute at the University of Alberta, agreed. While “the export engine is running very hot” and most of the economy is being led by that, the domestic side is a different story as “job creation is lagging and this will create problems for Beijing”, Hasmath told Al Jazeera.
The BriefWire