NewsChina's export strategy and population decline signal economic risks

China's export strategy and population decline signal economic risks

China is fighting for its life. It may sink European factories.
China is fighting for its life. It may sink European factories.
Images source: © PAP | Xinhua/Photoshot. All rights reserved.

4:13 PM EST, March 3, 2024

Factories are churning out more cars, machinery, and consumer electronics than the domestic market can handle. Supported by low-interest loans from the government, Chinese firms are overwhelming foreign markets with unsellable domestic inventory, the American newspaper highlights.

Chinese economy is slowing down

The Wall Street Journal notes that China’s annual economic growth rate was 5.2 percent last year—a figure that would thrill many European leaders but was met with subdued response in China.
Furthermore, analysts, including those from consulting firm Capital Economics, foresee a GDP growth decline, in part due to an ongoing crisis in the real estate sector. They predict that by 2030, the annual growth rate may cool down to about 2 percent.
Boosting exports might revive the Chinese economy, but it could spell trouble for the Western industrial sector. The Wall Street Journal recalls the early 2000s when a surge in Chinese exports resulted in numerous factory shutdowns. In the United States alone, more than two million jobs were lost from 1999 to 2011.

This time, however, there are mitigating factors. The United States, Europe, and Japan have either implemented tariffs on certain imports or have considered such measures, and have offered financial aid to key industries. In efforts to foster better relations with Western countries, some Chinese firms have even started opening new factories there.

The Wall Street Journal suggests that a significant increase in industrial product supply, amid decreasing purchasing power, could lead to deflation in China.

China is depopulating

Another challenge facing China is demographic decline. Official figures show that in 2023, China’s population decreased by 2.087 million, bringing the total to 1.409 billion—marking the highest death rate since the Cultural Revolution of the 1960s.

Yi Fuxian, an American demographer from the University of Wisconsin-Madison, warns the situation could be even grimmer than officially reported.

- The Chinese demographic crisis surpasses any projections by both the People's Republic of China and the international community, potentially leading to even slower economic growth than currently anticipated, Fuxian asserts.
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