accounted for 25-30% of GDP most of the last 2 decades, went through a painful bust. Household wealth, much of it in properties, declined. Unemployment went up, especially for the fresh college graduates.
Another wave of books and theories about “China Collapse” have found eager audiences in the western media and economic circles.
the economic reality in China –
– GDP contribution of the property industry was a negative 2% in 2024, meaning the rest of the Chinese economy grew 7% to achieve a 5% overall growth.
– Total contribution of the property industry to Chinese GDP has fallen below 20% from a high of 25-30% a few years ago. This is a much-needed rebalancing as more capital and resources are now redirected to other productive industries such as green energy and high tech,
– Housing prices have fallen between 30 to 40% in most Chinese cities in the past 5 years. This has a massive downward wealth effect for property owners, pressuring consumer spending. But housing has become much more affordable for urban households. Housing sales and rental prices have both declined.
– Few Chinese households have got into financial crisis from falling housing prices as average mortgage borrowing is less than 50% of total housing price. There is a much higher level of downpayment in China than elsewhere (typically 70-80% borrowing).
– Housing sales and prices have started to stabilize in the second half of 2024. The government is planning to buy out the surplus supply and turn them into low-price affordable housing units.
– There is little to no consumer inflation in China in the last 5 years, in sharp contrast with most other countries, especially the west.
– Annual household income growth for the past 5 years was 6.5%. Now a greater proportion of GDP is going to household income, giving China one of the highest income-to-GDP ratio globally. Urban retirement income has been raised 3 to 5% annually in the last decade, far outpacing CPI which is less than 2%.
– While luxury consumption has declined, affecting businesses such as LVMH, middle class spending has not slowed down.
– Discretionary consumer spending has bounced back to pre-Covid level, with travel expenditure, education and entertainment spending on double digit growth.
– Apart from consumer spending, Chinese global trade reached a record of $6 trillion in 2024, with an unheard-of $1 trillion surplus. China is now leading the global auto industry, photovoltaic industry, solar/wind/hydro/nuclear power industry, robotics, etc.
China has increased its share in global semiconductor industry. China has even made inroad in the commercial aviation industry with COMAC taking a bigger share of narrow-body passenger aircraft market.
In fact, I challenge anyone to name a single manufacturing industry where China has not become more competitive, moved up the value chain, and gained global market share.
For the average Chinese, the slower GDP growth has translated into 1) lower housing cost; 2) little inflation; 3) no impact on real income growth. I doubt many are feeling gloom and doom.
On the other hand, the “high” GDP growth in the US has not benefited the average Joe-six-pack who must deal with higher housing prices and rents, high inflation across a full spectrum of products and services, including big-item spendings in cars, student loans and healthcare.
I have no way of confirming the most of China economy counterpoints.
China consumption growth is based on Chinese government figures. True or false?
McKinsey seems to buy the figures:
And the above report suggests the number of foreign companies exiting has been overstated in Western media.
China has zero inflation, perhaps even deflation.Yet consumer consumption is supposedly on the rise.
Exports to USA has taken a big hit. But overall China exports is on the rise.
Is the US economic war upon China a failure?
Has the Western media reports upon the fall of the Chinese economy biased in some measure; pushing the resident government propaganda agenda?
Of course demographics ultimately wins out. Ethnic China, Germany, Italy, & Japan are all headed toward the boneyard; but it takes time. Those economies eventually will need massive numbers of immigrants to keep their economies going.
According to the UN
https://worldmigrationreport.iom.int/msite/wmr-2024-interactive/
Germany’s population is 18.8% immigrants
Italy’s population is 10.6% immigrants
Japan’s population is 2.2% immigrants
China’s population is .1% immigrants