Six Red Flags Pointing to China’s Economy Slowing Down
The People’s Republic of China is the world’s second-largest economy, responsible for one quarter of global GDP growth this millennium—so when the country catches a cold, the world notices.
The past several months have seen an avalanche of bad economic news for China, putting the country’s post-pandemic recovery, and global economic growth, in jeopardy.
In this visualization, we look at six important indicators that point to China’s economy slowing down. Data comes from the National Bureau of Statistics of China, the People’s Bank of China, and the General Administration of Customs, to see what is flashing red.
Six Red Flag Indicators on China’s Economy
China’s annual GDP growth rate has averaged 9% since 1978, when the country opened itself up to the global market under Deng Xiaoping.
However, growth seems to have slowed to a crawl, down to 0.8% (quarter-to-quarter) in the second quarter of 2023 driven by weakness in the Tertiary Sector, which includes retail spending and the troubled real estate sector. This follows a more robust 2.2% figure in Q1, which was driven by pent-up demand released by the end of COVID-era lockdowns.
On an annual basis, China’s GDP expanded 6.3% year-over-year, below the forecasted 7.3% rate.
Exports fell by 14.5% in July, marking the third straight month of declines, and hitting lows not seen since February 2020. Meanwhile, imports fell 12.4%, reflecting the cautious consumer mood.
On a regional basis, exports fell year-over-year to China’s three biggest customers, ASEAN, the EU, and the U.S., by 17.4%, 15.1%, and 20.8% respectively.
There was one bright spot, however: exports to sanction-burdened Russia increased 51.8%, but that wasn’t nearly enough to offset the overall downward trend.
3. Consumer Price Index
The consumer price index moved into deflationary territory for the first time since 2021, with prices falling 3% year-over-year. The decline was led by Household Articles and Services, Food & Tobacco, and Transportation and Communications.
At the same time, the prices that producers paid for industrial products (PPI) fell 4.4% (year-over-year), the tenth month in a row with a negative reading.
4. Youth Unemployment
And while the headline unemployment rate remained steady at 5.3% in August 2023, up slightly from 5.2% the month before, it papers over serious weakness for urban youth, aged 16 to 24.
5. Yuan vs. USD
Given the stream of economic bad news, it’s no surprise that the yuan fell to a 16-year low against the U.S. dollar on August 16, 2023 in offshore trading.
In an effort to stabilize the currency, major state-owned Chinese banks were seen buying up yuan in offshore money markets. At the same time, the spread between the fixed exchange rate set by the People’s Bank of China and the offshore rate, rose to more than 1,000 basis points.
6. New Loans
Adding to the dismal economic mood, people borrowed less money according to the most recent figures provided by the government.
New bank loans fell to ¥346 billion in July, down from ¥3.05 trillion in the month before. This was the lowest reading since late-2009, and less than half of the ¥780 billion economists had forecast.
Foreign Affairs recently published an article with the provocative title “The End of China’s Economic Miracle,” arguing that China’s troubles could be a U.S. opportunity.
And while this may be somewhat premature, the Middle Kingdom has some serious structural issues to contend with, many of them of their own making. Some of the top challenges include crackdowns on the tech sector, a collapsing real estate market, a larger debt crisis, and a shrinking population.
But large-scale government intervention does not appear to be in the offing, beyond exhortations for consumers to spend more and blaming Western media for engaging in “cognitive warfare.”
It’s no wonder that consumer confidence has plunged so low. At least we think so: the Chinese government stopped publishing that too.
Visualized: Seaport Trade Traffic by Country
This infographic highlights the countries with the highest container traffic across their ports, thus dominating seaport trade in 2021.
Visualized: Seaport Trade Traffic by Country
According to the World Bank, global seaport trade traffic reached 841 million TEUs (20-foot container equivalent units) in 2021.
In this infographic, Winifred Amase uses that data to highlight the countries with the highest seaport trade traffic.
China Leads All Seaport Trade Traffic
With a third of the world’s total seaport trade traffic surrounding its many ports, it’s no surprise to see China on top of the list.
In addition to owning seven of the world’s 10 busiest ports, the country also owns close to 100 ports across 63 other countries. This brought the country’s container traffic up to 263 million TEUs in 2021.
|Country||20-Foot Container Count (2021)|
|🇺🇸 United States||61M|
|🇰🇷 South Korea||30M|
|🇦🇪 United Arab Emirates||19M|
|🇭🇰 Hong Kong SAR, China||18M|
In second place is the United States, which saw container traffic of 61 million TEUs. Massive U.S. ports in Los Angeles and New York are some of the busiest ports on the continent.
Asian countries dominated the rest of the top 10 list, taking up seven of the remaining eight spots.
Singapore came in third with 37 million 20-foot container units passing through in 2021. The port handled 599 million tonnes of freight, making it the busiest single port in total shipping tonnage.
The ports in Dubai and Abu Dhabi make the United Arab Emirates a key player in Middle Eastern trade. With a container traffic of 19 million TEUs, the UAE is seventh on the list of nations with the highest seaport traffic in 2021.
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