China’s economy is burdened by years of excess. Here’s how bad it really is.
Subscribe to enjoy similar stories. China’s go-go days are behind it as the world’s second-largest economy struggles with the bursting of the biggest real-estate bubble ever. Now, China’s goal of overtaking the U.S.
as the world’s largest economy might take decades longer than Beijing expected—if it happens at all. China’s economy today is burdened with excess: Millions of empty or unfinished apartment blocks, trillions of dollars in debt straining local governments and ballooning industrial production driving an export surge that is igniting trade tensions worldwide. China still has strengths: It dominates global manufacturing and has commanding positions in new technologies, such as electric vehicles and renewable energy.
Policymakers have proven adept at handling past crises, and are readying bold new stimulus to support the economy. Nonetheless, the scale of the excesses plaguing China’s economy underscores the perilous position Beijing finds itself in as a new trade war looms. China’s property meltdown has since 2021 destroyed around $18 trillion of Chinese household wealth, according to an estimate by Barclays, eclipsing the losses suffered by Americans in the financial crash of 2008-09.
That hit, along with the trauma of Beijing’s heavy-handed response to the Covid-19 pandemic, helps explain why Chinese consumers aren’t spending freely. China’s rapid growth meant that for years forecasters expected China to overtake the U.S. as the world’s largest economy.
As recently as 2019, some forecasters were expecting China’s GDP to eclipse the U.S.’s around 2030. Today, it is the U.S. powering the global economy and China that is battling stumbling growth.
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