Beijing is right to be worried about the Chinese economy

Going by the number of state and Communist party plans to ‘boost consumption’ over the summer, it appears that Beijing is rattled about the Chinese economy.  

It is right to be worried. Deep-seated and systemic issues that predate Covid are tearing away at China’s fabled dynamism. These include excessive debt, low productivity, a flawed real estate market, weak income and consumption, poor demographics, a highly regressive tax structure, and a political governance structure that is controlling and generally hostile to entrepreneurship. 

The sudden abandonment of zero-Covid late last year was supposed to lead to a feisty economic bounce back and to ‘revenge consumption’.  In the event, even though there was a brief rebound in some retail spending early in the year, there’s been no significant bounce. 

Private investment, long seen as the mainstay of China’s economic ascent, is in the doldrums. In the first half of 2023, it fell slightly for the first time since 2005, when this data was first recorded.