Explainer | Is China’s economy in bad shape? 5 things to consider from silver linings and slow growth to Lehman Moments and Japanification

There have been mounting calls for bigger stimulus packages and further loosening of monetary policy to address both imminent stagnation and long-term problems

But Beijing has appeared reluctant amid the backdrop of an already high level of local government debt and fears of triggering the levels of inflation seen in the West

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China’s economic slowdown has been accompanied by a variety of problems, some of which are structural and stubborn to eliminate. Photo: Reuters

Published: 12:00am, 7 Sep 2023Updated: 2:35am, 7 Sep 2023

Global investors are becoming increasingly worried after China’s economic growth seemed to lose steam over the summer, while the risks faced by embattled property developers and local government financing vehicles (LGFVs) have further raised market concerns about a systemic outbreak.

But there are still some bright spots, including the rapid growth of the new energy and technology sectors, which may provide a much-needed boost to the economy.

Policymakers may still also have deep pockets to handle a variety of crises that may face the world’s second-largest economy.

1. China’s growth slowed, but didn’t stall or collapse

There were high hopes that China would return to its previous track of fast growth after abandoning its zero-Covid policy in December.

But its rebound lasted only one quarter, with an uneven economic recovery characterised by a manufacturing sector that was hit hard, while travel, catering and entertainment businesses reported strong growth.

Second quarter sequential economic growth then slowed to 0.8 from 2.2 per cent in the first three months as manufacturing activities continued to weaken.