What China's Slowdown Means for Us All

China's economic growth is unlike anything the world has experienced before, but now it is seeing a significant

slowdown

, there is the housing crisis and everything that followed from there, we do not expect any significant recovery in the Chinese housing market in 20124, we are seeing deflationary pressures. in China right now this is the deepest and longest deflation in China since the 1998 Asian financial crisis the stock market has lost about $6 trillion in value in the last year and a half you are seeing increases in unemployment, particularly Among the youth, the challenge for the rest of the world is that this

slowdown

means

China is now cutting spending, meaning Louis Vuitton sells fewer handbags, Apple sells fewer iPhones, and Chinese funding for railways in Africa and ports in Europe it exhausts everyone, from large multinational companies.

Ordinary people have been swept up in the story of China's rise which is now coming to an end In short it is bad for the global economy the question is how bad before we can understand the impact of all this we need understand how bad things are in China because for most of the last two decades the country's growth has been unstoppable. This is an economy that became the factory of the world, driving tons and tons of expansion and becoming this gigantic manufacturing power. The country's GDP regularly experienced double-digit growth and in 2010 it overtook Japan to become the world's second-largest economy.

People who were farmers moved to cities and became factory workers. It brought enormous amounts of wealth to all of these people, really lifted them out of poverty and into this massive burgeoning middle class. The rise of China's middle class benefited a wide range of multinational brands. Volkswagen, for example, sold more than half a million cars in China in 2005, in 2019 there were 4 million. Apple's sales in China went from nearly $13 billion to nearly $70 billion in a decade. 2018 Cosmetics giant Estee Lauder relied on China for most of its sales growth. Stephany, 36, has only known a booming China. She started working 10 years ago helping companies enter the Chinese market.

He just assumed quality of life would continue to improve, but then that boom story came to a halt during the pandemic. China stuck to a strict zero-Covid policy that saw local governments spend huge amounts of money on quarantines and testing and saw businesses, factories and entire cities shut down over a handful of geopolitical infections, especially tensions with the United States has exacerbated the problems. problems facing China's economy. Former President Donald Trump imposed a series of tariffs on Chinese goods and the Biden administration's limits on China's access to chip technology, along with concerns about a possible conflict over Taiwan, have meant that foreign companies have reduced their direct income. investment in China and there is also the real estate crisis.

This is an economy that was built through this rapid expansion of infrastructure projects driven by the rapid accumulation of debt between developers and local governments. You've seen the government crack down on bad developers who try to reign in unnecessary spending or shadow debt, but that has created this massive crisis of confidence within China. We have also seen it translate into weakness within the stock market. People are fleeing the stock market under this fear that the economy is slowing too much in 2023. Stephanie was laid off when her employer decided to reduce its operations in China Stephanie is not alone almost one in 3 Chinese office workers reported a drop of Stephanie found a job as an insurance agent, but her income saw a big drop for those entering the job market.

The situation is even worse. In fact, youth unemployment got so bad that China stopped publishing the data for a few months. Recent graduates like Y Shiong and his girlfriend now have to pay attention. in your finances, my goodness, because it is this change in attitude that will have wider implications for the rest of the world. All those companies that depended on China for much of their growth will have it much harder in the future and that has implications for Spending outside China too, we still haven't really seen tourism return to other parts of the world in the way we ultimately you would want to look at the Chinese spender and finally there is the political piece that has big consequences in this new The economic reality in China is also likely to lead to this new political reality: the slowdown complicates things for President Xi Jinping , who has long sought to solidify his position as China's most powerful leader, when the economy is booming, people are more likely to accept the Communist Party's decisions. controls on things like free speech in exchange for prosperity a slowing economy risks backlash also

means

China's influence outside the country may be curtailed with foreign spending on the same scale as in recent years becoming more difficult to justify there are ramifications for American taxpayers too For much of the last three decades, China has been one of the largest investors in US Treasury bonds sold by the US government to pay for public services.

China has already greatly reduced its holdings of US debt. If this continues, it could become For now it is more expensive for the US to borrow money, it is ordinary Chinese who bear the brunt of the slowdown.