The bad news for the People’s Republic of China’s (PRC) economy keeps pouring in, dampening the Lunar New Year outlook for many citizens.
In early February 2024, the International Monetary Fund (IMF) said the PRC’s economic slowdown will continue through 2028. The IMF forecast that the PRC’s growth would decline to 3.5% by 2028, down from a forecast of 4.6% for the previous quarter, the Agence France-Presse (AFP) news agency reported. In 2023, China’s economy grew by 5.2%, among its slowest rates in decades, according to the government. Chinese exports also fell in 2023 for the first time in seven years as global demand declined, AFP reported.
The news came just days after the Hong Kong High Court issued a liquidation order against China Evergrande Group, the Chinese property giant revealed to have debts of more than $300 billion and now a manifestation of the PRC’s worst real estate crisis. Evergrande’s collapse caused a cascade of real estate defaults and job losses and created a new class of victims: homebuyers left without assets. Property investment overall fell by 9.6% in 2023, according to Beijing.
The Chinese government’s inability to provide financial security and prosperity for the majority of citizens is increasingly apparent given that youth unemployment grew so large the PRC stopped publishing the data, according to news broadcaster CNN. A record 21.3% were unemployed as of June 2023, after which the government suspended the jobs reports. In December, government data reported 14.9% unemployment among those ages 16 to 24, but the figures were adjusted to exclude students, according to news broadcaster CNBC, making historical comparisons challenging.
The IMF forecast that demand for new housing in China could drop about 50% in the next decade and cautioned that if China’s property market continues to stagnate, it “could further weigh on private demand and worsen confidence.” In recent decades, the real estate sector accounted for about 20% of China’s economic activity, according to Yahoo Finance.
In addition to shrinking growth, the PRC will continue to face declining productivity and the economic effects of an aging population, the IMF reported. In January 2024, Beijing confirmed the population in 2023 fell by 2.08 million to 1.4097 billion as birth rates declined by 5.6%, the South China Morning Post newspaper reported.
The declining labor supply, coupled with increased health care and social spending, could increase China’s fiscal deficit and debt burden, and erode household savings, which generally leads to higher interest rates and less investment, analysts said.
The situation is becoming more deplorable for citizens who are not members of the privileged Chinese Communist Party (CCP) in the face of the hefty expenditures to appease CCP General Secretary Xi Jinping’s military and hegemonic ambitions. The Chinese government, for example, is spending over $230 billion a year on military expansionism and has spent over $4.3 trillion on infrastructure projects in developing nations since 2013, more than half of which fall under Xi’s One Belt, One Road scheme, according to estimates.
Despite its massive propaganda campaigns, the CCP cannot obscure the economic realities from citizens who feel the pain in their pocketbooks and are left wanting for better leadership. Along with contributing to job shortages, falling prices and a spreading real estate crisis, Evergrande’s liquidation means the Chinese government will not be providing bailouts. Property buyers in China will have no mechanism to seek compensation. Even complaints on social media and peaceful protests did little to inspire government action, according to Radio Free Asia (RFA).
“In the future, we can only rely on ourselves and bear business risks. If there is a break in the capital chain and liquidity risks, the Chinese government will most likely not make substantial intervention,” Ling Si, a financial scholar, told RFA. In the aftermath, as Chinese citizens suffer a sputtering economy, the government is loosening restrictions on real estate speculation, RFA reported, a policy which favors the ruling class.
Instead of a time of celebration, the Lunar New Year for many Chinese citizens is becoming more a symbol of economic decline, analysts contend. During the same period in 2020, the PRC facilitated the spread of the COVID-19 pandemic by withholding vital public health data and suppressing information about transmission and morbidity of the virus while permitting, even encouraging, citizens to gather and travel freely worldwide during the holiday, ushering in a global economic downturn that now may be hitting China’s economy the hardest.