China’s mounting economic woes are worrying world leaders. Any major problem in the world’s largest economy affects all countries in one way or another. They are the largest producers and consumers of many key commodities.
Affects growth
Many economists believe that China will face major economic and social problems this year. High unemployment among the youth, collapse of the real estate sector heavily invested by middle-class families, crises in the banking sector, slow growth of the financial sector post-Covid, and stifling of entrepreneurs for political reasons are all weighing on the growth of the world’s second largest economy.
According to reports, after two years of strict lockdown, Chinese consumers are very cautious in spending. With this, deflation started directly in the economy. The crisis in the real estate sector, which accounts for 70 percent of household wealth and nearly 30 percent of GDP, is denting investor confidence. Many home developers find themselves unable to repay their loans.
According to Nobel laureate economist Paul Krugman, a major cause of China’s problems is the poor leadership of President Xi Jinping. His unilateral interventions stifled private enterprise. He also points out that China’s current economic model is unsustainable. Adopting a strategy of paying low interest on savings and lending at low rates to the needy has reduced the income and spending power of households.
The population is declining
The situation is more serious in terms of population. The population is decreasing. The same trend is gaining momentum. As the birth rate declines, the average age of the population increases. A shocking report has now come out that by 2100 China’s population will shrink from the current 1.4 billion to 52.5 billion.
According to a report prepared by a research team at the Shanghai Academy of Social Sciences, China’s working-age population will drop to 21 million by 2100. This is only a fifth of the number in 2014, when this age group was at its peak. Imagine the problems that would cause in the economy!
This is not just China’s problem. Because their economic and technological power is unmatched, it affects everyone.
(This article was originally published in Dhanam Magazine February 15th issue)
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2024-02-25 02:45:30
