Slower-than-forecast growth and other signs of trouble are becoming a concern for China’s centrally controlled economy.
China’s economy grew by 6.3% in the second quarter compared to a year ago.
While on the surface, this might signal a strong economy, last year, China’s biggest cities were still in lockdown for COVID-19 precautions. As a result, analysts were expecting a much stronger recovery of 7.3%, as reported by CNBC.
Chinese officials pointed out that the country is still on pace to meet its stated 2023 growth goal of 5%, per CNBC.
The labor market is still robust, with an unemployment rate of 5.2%, below the 5.5% target, as reported by The Economist.
However, the unemployment rate for urban youth is at a record high of 21.3%, and unemployment tends to edge up after a period of weak growth in the overall economy of the kind China is experiencing now, as The Economist reported.
China is the world’s second-largest economy, according to Reuters. Chinese leaders had hoped to ride the meteoric growth of the past two decades — when growth averaged between 7 to 10% — to GDP parity with the U.S. The slowing growth in the overall economy threatens that plan.
Desmond Lachman, an economist at the American Enterprise Institute, told Reuters that he expects growth to slow.
“It is unlikely that the Chinese economy will surpass that of the United States within the next decade or two,” said Lachman, adding that with the youth unemployment factored in, it “will feel like an economic recession.”
Economists say that China’s economic ills are structural, reported Reuters, including a property sector bubble that burst after accounting for a quarter of the GDP, as well as the government’s tight control of the entire economy, including private business and foreign investment.
Wang Jun, chief economist at Huatai Asset Management, said, “The demographic problem, hard landing of the property sector, heavy local government debt burden, pessimism of the private sector as well as China-U.S. tensions do not allow us to hold an optimistic view towards mid- to long-term growth,” per Reuters.