China is sneezing, world may catch a cold
wholesale prices at the factory level have been falling for 10 months now. This means that there is a slowdown in demand, both domestically as well as internationally. In July, China’s goods exports in US dollar terms fell by 14.5% from July 2022.
At the same time, goods imports fell by 12.4%. Non-oil goods imports are always a good indication of domestic consumer demand, and thus a slowdown in overall imports suggests a slowdown in domestic demand. In fact, data from the National Bureau of Statistics of China shows that the total retail sales of consumer goods rose by just 3.1% in June, after rising by 18.4% in April and 12.7% in May.
So, clearly, there is a problem. And this is likely to have a global impact, given the huge size of the Chinese economy. One of the main symptoms of the problem with the Chinese economy is high youth unemployment rate (chart 1).
In June, the unemployment rate in the 16-24 age group stood at a very high 21.3%. Further, a couple of days back, the National Bureau of Statistics, which publishes the youth unemployment data, decided to temporarily suspend publishing it from July onwards. What this clearly implies is that the Chinese economy is not seeing enough new economic activity to be able to create jobs for the youth entering the workforce.
In fact, in November, the news agency Bloomberg had reported that the Chinese ministry of education expected around 11.58 million students to graduate from universities and colleges in 2023. These students are putting further pressure on the youth unemployment rate. The other big symptom of all not being well in the Chinese economy is the state of residential real estate.
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