China’s economic woes are a popular topic of discussion in the financial sector today because they are a rare occurrence. China was the first major economy to emerge from the 2008 global financial crisis, and they did not experience a recession following the pandemic. They are the second largest economy in the world. So, what’s causing this downslide and Chinese citizens to tighten their belts?
The recent slowing of China’s economy has been seen in falling prices on retail goods, cheaper apartment rents, slowing construction, and defaulted loans by developers. The nation had been under a zero policy for three years that was lifted in December of 2022. Once the Covid lockdowns were lifted, rapid economic growth was seen but could not be sustained. China is now experiencing what most of the world experienced in 2021, a lack of consumer and investor confidence.
To boost confidence, the Chinese government got creative. According to a statement published jointly by the NDRC, MIIT, and the Ministry of Commerce, “China unveiled a two-year plan to boost so-called “light industry,” which includes consumer packaged goods, consumer durables, sports and leisure equipment, and light industrial machinery.” They also increased loans, lowered interest rates, and some local governments may try consumer vouchers to get their citizens to open their wallets.
If China would like to improve their economy quickly, should consider ways to increase American consumer spending. In 2022 we saw $536.8 billion worth of imports from China. That’s a lot of smartphones, video game consoles, and toys. This year, Americans seem to be spending their hard-earned dollars on vacations and concert tickets, judging by social media posts. Total imports from China so far for 2023 are $44.55 billion.
The Chinese economy will recover and is already improving. The impact their economic struggles will have on the U.S. are likely to be minimal, but time will tell.