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China's Slow Economic Growth: Property Crisis and Global Headwinds

China, the world's second-largest economy, faced a challenging economic landscape in the past year, as official figures revealed that its gross domestic product (GDP) grew at one of the slowest rates in more than three decades. The 5.2 percent expansion to 126 trillion yuan ($17.6 trillion) in 2023, while beating Beijing's target and surpassing the 2022 performance, marked the weakest growth since 1990, excluding the pandemic years.


One of the primary factors behind China's economic slowdown is the crippling property crisis that has gripped the nation. For decades, the real estate market played a significant role in China's economic growth, contributing around a quarter of its GDP.

However, financial troubles at major firms like Evergrande and Country Garden, coupled with unfinished housing developments and falling prices, have led to buyer mistrust and an overall decline in the property sector's stability. The Chinese government's support measures for the real estate market have shown limited effectiveness, leaving the economy grappling with the repercussions.


China's economy experienced an initial post-pandemic rebound, but it lost momentum within months due to a lack of confidence among households and businesses, impacting consumption. Statistics from the past month indicate that deflation has persisted for three consecutive months, further deepening consumer reluctance to spend. The slowdown in retail sales, a key indicator of household spending, in December after a rebound the previous month reflects the challenges in boosting consumer confidence.


Global economic turmoil and tensions with the United States have added to China's economic woes. Efforts by some Western nations to reduce dependence on China and diversify their supply chains have contributed to the challenges faced by the Chinese economy. The geopolitical landscape has created an environment of uncertainty, impacting international trade and business activities.


China's economy is also burdened by a lack of business confidence, sluggish consumption, and a rising unemployment rate, particularly among the country's youth. A record number of young people aged 16 to 24 were unemployed in May, reaching over one in five individuals. The suspension of monthly youth unemployment figures publication suggests a challenging job market for China's younger population. Additionally, the acceleration of China's population decline in 2023 raises concerns about a looming demographic crisis that could further impact the economy.


As China faces a challenging economic landscape, there are concerns about the prospects for future growth. While the official figures for 2023 were in line with expectations, experts suggest that any true acceleration in the coming years will require either a major global upside surprise or more active government policy.

The pressure on Chinese officials to unveil additional stimulus measures to kickstart business activity and encourage consumer spending is likely to intensify, with the announcement of the growth target for 2024 expected in March.


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