A worker cleans the promenade in Shanghai on July 24, 2014. (Johannes Eisele/AFP/Getty Images)
Big Trouble in Little China
The country’s economic problems are starting to escalate.
China is a country of extremes, especially regarding economic forecasts. There are those who think “China will take over the world” with its technocratic central planning. Then there are those who say its debt bubble is so gigantic, the economy will crash and burn.
The truth, probably, lies somewhere in the middle. And it looks like we are getting closer to know the truth.
Official GDP growth, is of course on track at 6.6 percent for the year 2018, stellar among industrial and even emerging economies. But nobody believes these figures, even though they are the worst since 1990.
“Real GDP fell by 1.7 percent and 0.6 percent in Q3 and Q4 respectively compared with the official figures showing growth of 6.4 percent and 6 percent,” Enodo Economics chief economist Diana Choyleva wrote in a note to clients about the annualized growth during the past two quarters of 2018.
According to Choyleva, China is experiencing an unofficial recession.
While this doesn’t mean the crash and burn scenario is unavoidable, the flurry of official and unofficial economic indicators flashing red make the “take over the world” scenario quite unbelievable for the intermediate future.
Going Down
No matter which official indicator you look at, the Chinese economy is in decline. Retail sales growth is barely above 5 percent, the lowest level since 2003 with automobile sales crashing 13 percent. Total imports in U.S. dollar terms are down 7.6 percent in December of 2018 as compared to the year before.
China’s current account balance, or the amount of exports over imports and one of the main drivers of Chinese growth over the decades is down to 0.37 percent of GDP, from 10 percent in 2008.
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