China’s economy is barely recovering

Persistent deflation and a slower recovery in foreign trade show the strain on the Chinese economy. It is suffering from the simmering real estate crisis, weak consumption and geopolitical tensions.

China’s economy continues to suffer from deflation: Chinese consumer prices fell again in December compared to the previous month. As the statistics office in Beijing announced today, they fell by 0.3 percent. According to the statistics office, consumer prices for the year as a whole increased slightly, by 0.2 percent compared to the previous year.

But over the past three months, China’s economy has already been in deflation. Economists consider falling prices to be bad for the economy. They warn of a similar stagnation in the economy as in past decades in Japan.

Exports are rising again

Chinese customs also presented new figures. What is particularly striking is that trade with Russia continued to grow strongly – by 26.3 percent compared to the previous year. While Western countries have largely withdrawn from trade with Russia after the war of aggression against Ukraine, Chinese companies are moving into this gap.

Overall, China’s foreign trade only increased slightly in 2023. Imports fell by 0.3 percent and exports increased by 0.6 percent compared to the previous year. After exports had shrunk for several months last year, there were signs of recovery again at the end of the year. Economic data from Germany, South Korea and Taiwan also indicate that world trade is beginning to recover.

But Wang Lingjun from Chinese customs continues to see sluggish foreign demand: “It will remain difficult and require greater efforts to promote stable growth in foreign trade,” he says: “Trade protectionism and geopolitical conflicts are increasing. There are uncertainties and unpredictable factors such as the recent blockage of shipping in the Red Sea. These factors will affect trade.”

Weakness Domestic demand

The Chinese economy is recovering only slowly after the end of the strict corona measures about a year ago. The Chinese state and party leadership tried to revive weakening domestic demand with several measures such as purchasing incentives. In addition, China opened its borders again just over a year ago after the corona pandemic, and there was more tourism and exchanges of business delegations again.

In addition to weakening demand at home and on the global market, further challenges remain for the Chinese state and party leadership in 2024. Youth unemployment is at a record high. The real estate industry is still deeply in crisis.