Is the Chinese Economy Slowing Down? It's Manageable!

New Delhi, Sep 15 (NationPress) Recent data indicates that China's manufacturing output and retail sales are experiencing their most sluggish growth since August of the previous year. Reports reveal that retail sales have significantly decreased, reflecting a decline in domestic demand, while the unemployment rate continues to rise.

In August, industrial production recorded a modest increase of only 5.2 percent year-on-year, down from 5.7 percent in July. Retail sales grew just 3.4 percent last month, a drop from July’s 3.7 percent, falling short of the anticipated 3.9 percent increase.

Additionally, the unemployment rate climbed to 5.3 percent in August, and fixed-asset investment rose a mere 0.5 percent in the first eight months — the slowest growth for that period since 2020. Property investment plummeted nearly 12.9 percent year-on-year through August.

Earlier this month, Arthur Kroeber, the founder of Gavekal Dragonomics, a firm specializing in Chinese economic research, remarked: “China is grappling with persistent deflation, excess industrial capacity, diminishing profits, a fragile job market, and a struggling property sector.”

However, he also noted: “There are numerous challenges. Consumer sentiment is not particularly robust, but from a productive perspective, there are many positive aspects.”

Kroeber made these comments during an event hosted by the Washington-based Center for Strategic and International Studies on September 9.

Tianlei Huang from the Peterson Institute for International Economics echoed similar sentiments at the event: “China is dealing with the fallout of a housing bubble, weak consumer demand, and various other obstacles. Export growth is slowing due to ongoing trade tensions with the US. Nonetheless, the economy is certainly not on the brink of collapse.”

Recently, some analysts have pointed to the distress among foreign creditors, tariffs, and factory relocations as real costs to China. However, experts believe these factors primarily amplify domestic vulnerabilities rather than being the root causes.

China serves as a creditor to many developing nations through bilateral loans, export credits, and Belt and Road initiatives. This means that distress in these countries poses risks for Chinese lenders and exporters, rather than resulting in significant direct sovereign liabilities for China itself.

While Chinese lending abroad introduces credit and reputational risks for specific banks and contractors, it does not represent a dominant macroeconomic vulnerability for China's overall economy.

Trade tariffs can indeed act as a significant headwind, potentially reducing growth in the short to medium term and exacerbating deflation and excess capacity. However, they are not the sole or decisive factors behind China’s current economic challenges.

Simultaneously, there is a gradual shift towards a 'China Plus One' strategy, where multinationals are diversifying their production to countries like Vietnam, India, Mexico, and others to mitigate geopolitical and tariff risks.

This relocation trend is structurally reshaping China’s low-end manufacturing share and regional labor markets. While it poses a meaningful medium-term challenge in specific sectors, it does not signify an immediate collapse for the entire economy.

The primary long-term challenge for China remains reviving healthy nominal demand, addressing real estate and local government debt issues, and managing the transition towards industrial upgrading.

If Beijing can tackle these domestic vulnerabilities while reducing tensions with trading partners and accepting a gradual production rebalancing, it can endure these external pressures without a systemic breakdown — although growth and employment dynamics will inevitably evolve.