China released data on Monday that paints a bleak economic picture. In July, consumer spending, investment, factory output, real estate, and youth hiring all slowed. In response to the data, economists at Standard Chartered cut their forecast for the Chinese economy from 4.1 percent growth year-over-year to 3.3 percent.
Such a rate of growth is unacceptable in China, whose economy grew by more than 6 percent each year for 29 years before the COVID-19 pandemic and its accompanying lockdowns.
China’s President Xi Jinping is under additional pressure this year as he seeks a third term at this fall’s party congress, which he is widely expected to win. The economic woes are an impediment to his wielding of power, but they are best understood as a vulnerability that will impair China’s ability to challenge U.S. hegemony.
China wants to become the global superpower, a goal that includes developing a regional sphere of influence, challenging American power, and going after Taiwan. If it wants to be successful, it will have to do so within about two decades, as a demographic time bomb is waiting to go off due to its now-ended economically insane (and murderous) one-child policy. That means China must experience dramatic economic growth in the near-term in order to achieve its ambitions.
Perhaps the most precarious part of China’s economy right now is its real-estate market. A deflating housing bubble spurred on by Communist Party regulations is causing citizens to refuse to pay their mortgages en masse as well as triggering protests. The average price for a new home has fallen for 11 straight months.
Much of the responsibility for the economic problems lies squarely on the decision-making of the Communist Party, which voluntarily wounded the economy through intensive COVID-19 lockdowns that have dragged on into 2022.
On Monday, China’s central bank cut interest rates in an attempt to remedy the economic situation. It avoided stimulus spending, citing the country’s growing debts.
The U.S. can only hope that China’s economy will continue to spiral, making it more difficult to increase its power around the world.
