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How China’s economy became a ‘ticking time bomb’
The world’s second-largest economy is experiencing deflation for the first time in over two years – yet another sign that Beijing might need to roll out stimulus measures to reboot the country's stuttering economy. China can also add low growth, high youth unemployment, enormous amounts of debt, and faltering retail sales to a growing list of red flags that signal its hopes for a post-COVID economic revival have been dwindling.
A FALTERING ECONOMY
The latest figures confirm that China is suffering from deflation, which refers to when prices start to fall, rather than rise as is happening in the US. Some experts say China is suffering from "economic long COVID," in which a sluggish post-COVID rebound may be a long-term trend.
A BREWING REAL ESTATE CRISIS
Country Garden, a massive Chinese property developer, missed interest payments on two bonds, giving it a 30-day grace period to avoid an official default. But industry experts are worried a default would be even worse than Evergrande’s 2021 collapse that sent the global markets into mayhem.
On Tuesday, Country Garden, the country's biggest private-sector developer by sales, missed interest payments on two US-dollar-denominated bonds.
TOURISM HASN’T BOUNCED BACK EITHER
Despite reopening to the world after the pandemic earlier this year, it seems foreign visitors are not yet returning.
For almost three years, the country was all but closed to business travelers, tourists, and even residents' families as part of the stringent "zero-Covid" policy that was not abandoned until March.
A SHRINKING WORKING POPULATION
Decades of China's one-child policy have led to an aging population and lopsided ratio between elderly and youth. The country is on pace to lose nearly half of its current population by 2100, which doesn’t bode well for economic growth.
China's aging population will have a direct impact on its ability to compete with the US and other nations on the world stage.
A GROWING YOUTH UNEMPLOYMENT RATE
China’s post-COVID recovery has hit young people especially hard, giving rise to the "lying flat" trend of millions of college graduates still living off their parents with defeatist attitudes about their futures.
A SILVER LINING REST OF THE WORLD?
Falling prices in China aren't necessarily bad news for everyone else. Cheaper Chinese goods could lend a helping hand to central bankers elsewhere, according to analysts.
