China’s economic woes are multiplying — and Xi Jinping has no easy fix
Covid-19 controls, roared back to help power global growth. Instead, halfway through 2023, it’s facing a confluence of problems: Sluggish consumer spending, a crisis-ridden property market, flagging exports, record youth unemployment and towering local government debt. The impact of these strains is starting to reverberate around the globe, impacting everything from commodity prices to equity markets.
The risk of Fed hikes tipping the US into recession has also heightened the prospect of a simultaneous slump in the world's two economic powerhouses. What's worse, President Xi Jinping’s government doesn’t have great options to fix things. Beijing’s typical playbook of using large-scale stimulus to boost demand has led to massive oversupply in property and industry, and surging debt levels among local governments.
That’s sparked a discussion about whether China is headed for a Japan-style malaise after 30 years of unprecedented economic growth. Exacerbating this is Xi’s more assertive approach to dealing with the US, which has added fuel to American efforts to cut China off from supplies of advanced semiconductors and other technologies set to drive economic growth in the future. Altogether, the dynamics threaten not only to lead to disappointing growth this year, but also to thwart the Chinese economy’s momentum to surpass that of the US.
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