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China: economic growth slows as Xi Jinping faces challenges

In his year-end address, Chinese President Xi Jinping acknowledged the difficulties the economy of China is facing, describing “winds and rain” as the new norm. Despite praising economic resilience post-pandemic, he admitted that some businesses are facing commercial pressures, and many people struggle to find work and cope with daily life.

China: economic challenges and Moderate growth

While the GDP recorded a growth of 5.2% this year, surpassing the Party’s target, the World Bank predicts lower growth in 2024 (4.5%) and 2025 (4.3%). These data may indicate a systemic crisis rather than just a conjunctural slowdown.

Contraction in Industry and Consumer Savings

Official reports indicate a contraction in industrial activity due to a scarcity of domestic and foreign orders, and a slowdown in services due to post-pandemic consumer savings. While the economy appears to be recovering, the reality is that many companies, especially in the private sector, continue to struggle.

Consumption Downgrading and Youth Unemployment

The primary issue is the decline in consumption, highlighted by the “downgrading of consumption” shared on social networks. Companies producing essential consumer goods are feeling the impact. Additionally, youth unemployment, attributed to the high expectations of the young population, is another challenge. China needs qualified jobs, but the weakened economy does not generate them in sufficient quantities.

China: Declining Population and Pro-Natalist Policies

A long-term problem is the declining population, despite the end of the one-child policy in 2015. The birth rate remains at 1 child per couple, and the population is aging. Also, the Chinese government adopts a pro-natalist rhetoric, but the results are disappointing. The “one-child policy” has left a deep mark, and China now faces a significant demographic challenge.

Mixed Indicators and Manufacturing Growth

Despite these challenges, China shows mixed signals. While the economy slows down, Caixin’s manufacturing PMI in December rose to 50.8, the highest level in four months, indicating expansion in the manufacturing sector.

China: Positive Outlook in Manufacturing

The increase from November’s 50.7 was partly due to a stronger increase in new orders, the most significant since February. The Caixin report attributes the turnaround to both market conditions’ improvement and increased customer spending. However, companies remain cautious about hiring and new orders from abroad.

Political Adjustments to Support Recovery

In a context of economic slowdown, Caixin’s data paints a more positive picture than official data. Economists emphasize the importance of political adjustments to stabilize expectations, create jobs, and build long-term market confidence.

Conclusion: Challenges and Opportunities

While China faces economic challenges, its military rise continues, with military spending nearly on par with the United States, creating a combination of economic crisis and military assertiveness that could influence global dynamics. China is gearing up for 2024 with a perspective of slowed economic growth, but mixed indicators suggest the government is implementing measures to support recovery. The new year may bring challenges but also opportunities for a nation navigating the complexities of its evolving economy.

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