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Chinese President Xi Jinping.

GZERO Media/ Jess Frampton

China’s economic woes, explained

After forty years of extraordinary growth, China’s economy may be entering an era of stagnation.

Youth unemployment just hit a record high of 21%. Manufacturing activity is contracting. Exports have declined on the back of sticky inflation and soaring interest rates in the US and Europe. Foreign investment has stalled. Capital outflows are accelerating. The property sector, which makes up a fifth of the economy, is crashing. Property development behemoth Evergrande Group filed for bankruptcy last month. China’s largest homebuilder, Country Garden Holdings, is on the verge of default. Headline growth has come in lower than expected, and the overall economy is flirting with deflation amid persistently weak consumer spending, faltering private investment, and mounting financial stress.

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Workers work on a production line at a silk workshop in Haian, Jiangsu province, China.


China is open for business

In an uncharacteristic acknowledgment of weakness, China on Sunday announced a plan to attract more foreign investment and boost its stagnating economy. The 24-point plan aims to improve the climate for FDI, which has taken a hit from the Communist Party’s unpredictable and occasionally hostile policies towards foreign companies.

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A worker works at a workshop of a textile company in Binzhou city, East China's Shandong province.


China flirts with deflation. Why is that a bad thing?

Times are tough in the world’s second largest economy. After several years of on-and-off-again pandemic lockdowns, China’s economic rebound remains limp. Even the notoriously tight-lipped politburo of the Chinese Communist Party recently nodded to the economy’s “tortuous progress.”

While much of the rest of the world contends with inflationary pressures, many economists say China is tussling with the inverse phenomenon: deflation.

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Jess Frampton

Has China’s power peaked?

I had a fascinating debate on this question a few months ago with political scientist Michael Beckley, who wrote a thoughtful and compelling book arguing that China’s relative rise is over and, therefore, that the United States will remain the world’s sole superpower for the foreseeable future.

This isn’t a new claim. In fact, every few years going back decades we get a new big article or book saying China’s power is peaking and its decline (or even collapse) is imminent. So far, they’ve always been wrong. But could it be true this time?

Let’s break down the strongest arguments on both sides and decide (spoiler: I say “not so fast”).

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