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China's economic growth was like nothing
the world has ever experienced before
but now it's seeing a significant
slowdown there's the property crisis and
all of the followed from there we not
expecting any um meaningful recovery um
in Chinese property Market in
20124 you're seeing deflationary
pressures play out in China right now
this is the deepest and longest
deflation in China since 1998 Asian
financial crisis the stock market has
lost some $6 trillion dollar in value
just over the last year and a half
you're seeing rises in unemployment
particularly among the country's youth
the challenge for the rest of the world
is that this slowdown means China is now
cutting back on spending that means
Louis Vuitton sells fewer handbags Apple
sells fewer iPhones and Chinese funding
on rail in Africa and ports in Europe
dries up everybody from Big
multinational companies to ordinary
people have been swept up in China's
Boom story that's now coming to an end
in short it's bad for the global economy
the question is how
China’s growth miracle
bad before we can understand the impact
of all of this we need to get the grips
with how bad things are in China because
for most of theast last two decades the
country's growth has been
Unstoppable this is an economy that
became the world's Factory floor by
driving up tons and tons of expansion
and becoming this giant manufacturing
Powerhouse the country's GDP regularly
saw double digit growth and in 2010 it
overtook Japan to become the world's
second largest economy people who were
farmers moved to the cities and became
Factory workers it brought tremendous
amounts of wealth to all of these people
really just driving them up out of
poverty and into this burgeoning massive
middle class the rise of China's middle
class benefited a wide range of
multinational Brands Volkswagen for
example sold over half a million cars in
China in 2005 by 2019 it was 4 million
Apple's China sales went from almost 13
billion dollar to close to 70 billion
within a decade by 2018 the cosmetics
giant Estee Lauder relied on China for
most of its sales
growth 36-year-old Stephany has only
known a surging China she started
working 10 years ago helping companies
enter the Chinese market she just
assumed the quality of life would keep
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improving
The end of the boom
but then that boom story came to a halt
during the pandemic China stuck to a
strict covid zero policy that made local
governments spend massive amounts of
money on quarantine and testing and saw
businesses factories and entire cities
shut down over a handful of infections
geopolitics especially tensions with the
US have exacerbated the problems facing
China's economy former president Donald
Trump imposed a raft of tariffs on
Chinese goods and the Biden
administration's limits on China's
access to chip technology along with
concerns about a possible conflict over
Taiwan have all meant foreign businesses
have reduced their direct investment
into China and there's also the property
crisis this is an economy that was built
up through this rapid expansion of
infrastructure projects fueled by uh
rapid buildup of debt among developers
among local governments you've seen the
government crack down on bad actor
developers trying to reign in
unnecessary spending or Shadow debt but
that's created this massive confidence
crisis within China we've also seen that
translate into weakness within the stock
market people flee the equities Market
under this this fear that the economy is
just slowing down too
Young Chinese cut spending
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much
in 2023 Stephanie was let go when her
employer decided to downsize its
operations in
China Stephanie is not
alone
nearly one in3 Chinese office workers
reported falling salaries in 2023 the
highest share in at least 6
years to make ends meet Stephanie found
a job as an insurance agent but her
income saw a big
drop
for those who are entering the job
market the situation is even worse in
fact youth unemployment got so bad that
China stopped publishing the data for a
few months fresh graduates like Y shiong
and her girlfriend now have to keep a
close eye on their
finances oh my
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God
for
it's this change in attitude that will
Consequences for the world, Xi Jinping
have broader implications for the rest
of the world Al those companies that
depended on China for much of their
growth are going to have a way tougher
time going forward and that has
implications for spending outside China
too we still haven't really seen uh that
returned tourism to other parts of the
world in the way that you'd ultimately
want to see out of the uh Chinese
spender and finally there's the
political piece which has big
consequences this new economic reality
in China is also likely to lead to this
new political reality the Slowdown
complicates things for president Xi
Jinping who is seeking to solidify his
position as China's most powerful leader
since
maong when the economy is booming people
are more likely to accept the Communist
party's controls on things like freedom
of speech in exchange for Prosperity a
slowing economy risks the opposite
reaction it also means China's influence
outside the country may be curtailed
with foreign spending on the same scale
as recent years becoming harder to
justify there are ramifications for us
taxpayers too China has for much of the
past three decades been one of the
single biggest investors in US
treasuries bonds sold by the US
government to pay for public
services China has already cut back on
its US debt Holdings in a big way if
that continues it could become more
expensive for the US to borrow money for
now it's ordinary Chinese bearing the
brunt of the
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Slowdown
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