China's economy is currently facing significant challenges, with growth slowing to its lowest rate since the beginning of 2023. In the third quarter, the economy expanded by just 4.6% compared to the same period last year, marking a decline of 0.1 percentage points from the previous quarter.
The struggling real estate market has prompted the government to announce a substantial aid package exceeding 500 billion euros aimed at revitalizing this critical sector. The aid package includes measures such as completing unfinished real estate projects, renovating existing buildings, lowering interest rates on existing loans, and relaxing purchasing rules. However, the effectiveness of these measures is under scrutiny as consumer confidence remains low due to the ongoing real estate crisis.
Inflation rates have plummeted, with August figures at 0.6% and September dropping to just 0.4%. Both export and import figures have fallen short of expectations, largely due to geopolitical tensions and trade disputes with major economies like the United States and the European Union.
Youth unemployment is also a pressing issue, with the latest figures indicating an alarming rate of 18.8% among individuals aged 16 to 24. Critics argue that the government's approach has been more about stabilization rather than fostering genuine growth, which is essential for long-term recovery.
The reliance on state-controlled banks to distribute loans further complicates the situation, as the intertwining of politics and finance in China creates a unique set of challenges for economic recovery. The current economic strategy in China, which has prioritized industrial production, is increasingly being labeled as a failure due to significant structural overcapacity. This overproduction poses serious risks to economic stability and growth.
As the country navigates these challenges, the interplay between political influence and economic policy will be crucial in determining the future trajectory of the Chinese economy.