China's economic crisis

BREAKTHROUGH - After the pandemic, most of the world began its economic recovery. Most of the world expected that China's economic growth would rapidly reach its former status as one of the world's leading economies. However, the Chinese recovery never happened.

- ELFREN S. CRUZ

In July of this year, official Chinese data showed that the country's economic growth had fallen behind the government's economic target.

Aside from its weak GDP performance, China showed that there was a drastic fall in consumer confidence and a massive downturn in property prices that has caused some of the largest state companies to default on their loans.

The Chinese government, which really means the Communist Party, has taken drastic steps to reignite its economic growth. Many Western observers have pointed out that the steps taken by Xi Jinping have actually exacerbated the situation. It seems that China's main solution is to increase its industrialization and investments in more infrastructure. Beijing's industrial policies have led to over-investment in manufacturing, which has led to huge debt burdens for Chinese local governments and business firms.

China is producing far more output than the domestic economy can absorb. As in the past, it has turned to foreign markets to absorb its excess production.

However, in the last few years, foreign nations, especially the relatively rich Western countries, have started countering the overflow of Chinese exports of cheap products, many of them even being sold for below the break-even point.

In December 2023, European Commission President Ursula von der Leyen warned that excess Chinese production was causing unsustainable trade imbalances and accused Beijing of engaging in unfair trade practices by exporting ever greater quantities of Chinese products into the European market at cutthroat prices.