China’s Economy Slows, Shows No Clear Signs of Improvement: Kiplinger Economic Forecasts
The biggest factors include fewer exports, a dwindling housing market and less consumer spending.
China plays a big part in global trade, and as the country's economy slows, the effects are felt worldwide. To help you understand what is going on and what we expect to happen in the future, our highly-experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest...
Something’s amiss with China’s economy. The end of COVID was supposed to boost it, as Beijing ended its draconian lockdown measures. After a brief spurt, Chinese growth is falling. And when China’s economy slows, the whole world feels it, given China’s huge role in world commerce.
Note the red flags popping up in China: Its factory sector is contracting as demand for Chinese goods cools around the world. Consumers who are contending with inflation have less space in their budgets for nonessential items these days. Services and construction activity are down. Ditto, retail sales and business investment.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Most worrisome of all: the housing market, which peaked in May 2021. Since then, home sales are down by half. Price gains are weak. Many cities are full of empty apartments, a legacy of overbuilding. Housing was long a driver of China’s growth. But not now, and not anytime soon. Demand hasn’t kept up with the furious pace of construction. China’s consumers have plenty of money. However, they are saving, not spending. Consumer sentiment is below pre-COVID levels. Beijing has exhausted the potential of goosing the economy by channeling credit into the property market. Lenders are already grappling with too much bad debt.
In the longer run, China faces an even bigger problem: population decline. Its cohort of working-age people was already slipping, and then last year saw a drop in the total population for the first time in decades. Fewer people means fewer workers to contribute to GDP growth, fewer sales of goods and services, etc. No way around it.
Without housing to rely on, look for Beijing to try other types of stimulus, such as cheap credit, in the form of lower interest rates on various types of loans. But that risks saddling an economy already drowning in debt with more bad loans.
And there will be more spending on infrastructure, another old standby of the regime. Details are scant so far but expect to hear about a big infrastructure initiative when Communist Party leaders meet in late July. Whatever form that package takes, it won’t fix the structural problems described above. That would take real reform.
For the U.S. and other countries, China’s slowdown means several things, including a relatively cheap yuan, as a result of Beijing loosening credit. That in turn makes Chinese exports cheaper and other countries’ goods more expensive in China. There will be some easing in global commodity demand since China consumes so much of so many raw materials. That could act as a bit of a damper on global inflation. And, there will be no let-up in Western sanctions and tariffs meant to punish Beijing for unfair trade practices or to dissuade it from aggressive acts toward Taiwan.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Rodrigo Sermeño covers the financial services, housing, small business, and cryptocurrency industries for The Kiplinger Letter. Before joining Kiplinger in 2014, he worked for several think tanks and non-profit organizations in Washington, D.C., including the New America Foundation, the Streit Council, and the Arca Foundation. Rodrigo graduated from George Mason University with a bachelor's degree in international affairs. He also holds a master's in public policy from George Mason University's Schar School of Policy and Government.
-
Why Hewlett Packard Stock Is Still a Buy After Earnings
Hewlett Packard stock is sizzling Friday after the tech giant beat expectations for its fiscal fourth quarter. Here's what Wall Street is saying.
By Joey Solitro Published
-
Ulta Beauty Stock Gets a Much-Needed Boost After Earnings
Beaten-down Ulta Beauty stock is notably higher Friday after the cosmetics retailer's strong earnings report and encouraging outlook.
By Joey Solitro Published
-
Don't Sleep on Japan's Economic Transformation
The Letter After almost three lost decades, Japan — one of the world's biggest economies — is finally showing signs of life.
By Rodrigo Sermeño Published
-
Start-ups Trying to (Profitably) Solve the World’s Hardest Problems
The Letter More investors are interested in companies working on breakthrough science to tackle huge societal challenges. The field of deep tech has major tailwinds, too.
By John Miley Published
-
The Big Questions for AR’s Future
The Letter As Meta shows off a flashy AR prototype, Microsoft quietly stops supporting its own AR headset. The two companies highlight the promise and peril of AR.
By John Miley Published
-
China's Economy Faces Darkening Outlook
The Letter What the slowdown in China means for U.S. businesses.
By Rodrigo Sermeño Published
-
Should We Worry About the Slowing U.S. Economy
The Letter With the labor market cooling off and financial markets turning jittery, just how healthy is the economy right now?
By David Payne Published
-
Kiplinger Special: How Businesses Should Budget for 2025
Kiplinger Forecasts From fuel to AI software subscriptions, here's what you can expect to pay next year.
By John Miley Published
-
Intel Braces for an Even Tougher Road Ahead
The Kiplinger Letter Amid a long, costly turnaround, Intel resets expectations again. Its new woes raise questions about U.S. industrial policy and global chip competition.
By John Miley Published
-
Kiplinger Special: The Long-Term Future of the U.S. Economy
The Kiplinger Letter Kiplinger's report into what it will take the U.S. to maintain a healthy economic growth rate.
By David Payne Published