The country is on the edge of deflation and there are signs of weak consumer spending. China’s total debt-to-GDP ratio is around 350 percent. A debt crisis is coming, and it is bound to be the biggest in decades.

A declining population has weakened the labour supply. The population growth is 0.15%. And uncertainty surrounding China’s economy and geopolitical tensions have together driven foreign investment out of China. In 2024 so far, inward foreign direct investment in China is less than 10% of the US$344 billion it received in 2021.

Many of the risks facing China’s economy stem from its ailing real estate sector. For decades, China’s economy was dependent on a booming property market driven by speculative investment returns. However, this growth was largely driven by debt. To maximise their profits, developers even began selling houses before they had been built.

Demand for Chinese goods from abroad has also been declining due to trade restrictions imposed by the US and the EU, geopolitical concerns and shocks to global supply chains.

China needs a consumption-based economy because the United States and European Union are beginning to close their markets to Chinese products, due to the regime’s predatory and criminal trade practices. Even countries in the so-called Global South are reluctant to let China decimate their local industries with a flood of exports.

Indonesia, Turkey, Mexico, Chile and Brazil, for instance, are increasing tariffs on Chinese goods.  However falling Chinese economy may give boost to Indian manufacturing which is working hard to catch up soon!