Deflation Crisis, Real Estate Slump, External Risks Threaten China’s Economy
A container ship prepares to dock at a port in Xiamen, Fujian province, China, on December 27 last year. ⓒAP/Newsis
China’s GDP expanded by 5.2% in 2023. However, concerns over the Chinese economy remain as deflation risks, housing crises, and external risks beset.
According to state-run Xinhua News Agency and others, the National Bureau of Statistics of China announced on the 17th that China’s GDP increased by 5.2% compared to the previous year, reaching 12.2 trillion yuan (approximately $1.92 trillion). The quarterly growth rates were 4.5% in the first quarter, 6.3% in the second quarter, and 4.9% and 5.2% in the third and fourth quarters, respectively.
The National Bureau of Statistics said, “We achieved the government’s target of 5% last year without difficulty.” It explained, “There were difficulties in economic development due to various external factors, but we have entered a phase of economic recovery due to policies expanding domestic demand and supply-side structural reforms.” Premier Li Keqiang also self-assessed at the Davos Forum the day before, saying, “The Chinese economy is steadily recovering and continuously providing strong momentum to the global economy.”
However, considering the impact of the COVID-19 pandemic on last year’s growth rate, analyses generally say that it is a stretch to say that the Chinese economy is recovering. The New York Times (NYT) reported, “Economists predict China’s economic growth rate in 2024 to be less than 4.5%,” and “As the slowdown in growth, deflation, asset bubbles, and financial crises continue, the Chinese economy is expected to face the most serious crisis since the global financial crisis in 2009.”
The Chinese economy has seen increased unemployment among Chinese residents and decreased income levels due to the ongoing COVID-19 lockdown measures over the past two years. China’s consumer price index (CPI) rose 0.2% from the previous year, but the possibility of deflation (price decline in a recession) is increasing as it has been on a downward trend for the past three months.
In addition, the real estate market slump that emerged from 2021, tension in cross-strait relations due to the election of anti-China candidate Lai Ching-te as president, escalating trade conflicts with the United States, and a decrease in foreign investment are also emerging as uncertainties. Last year, China’s exports fell 5.5% to $3.38 trillion (approximately $444 trillion), and foreign direct investment decreased by about 10%.
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