China's economic growth faces a critical juncture, with structural challenges and weak consumer demand raising concerns about a potential slowdown. Overcapacity in key industries, coupled with declining property values and youth unemployment, threatens long-term stability.
Chinese consumer confidence is weak, domestic consumption remains muted, and unemployment among youth has surged, raising concerns about unrest and long-term stagnation. Unsold housing inventory in China exceeds two years’ worth of demand, and property values could fall another 20-25% without sustained government intervention. USD/CNH could see a bullish breakout to 18-year highs above 7.37, potentially even rallying toward 7.50 or higher in the coming year.
China’s economy, the world’s second-largest, faces a convergence of critical challenges that could culminate in a long-awaited-but-nonetheless-surprising economic slowdown in 2025. Following the end of Beijing’s stringent “zero-COVID” policy in late 2022, analysts initially predicted a strong economic recovery, but the reality has been a stagnating growth. The reasons are deeply structural, compounded by a sluggish property market, overcapacity in key industries, and an aging population. If the much-ballyhooed stimulus out of Beijing fails to comprehensively address these challenges in the coming year, “the world’s growth engine” may sputter in 2025, with major cross-market implications for traders.Many in the west are skeptical about the validity of official Chinese data, and even by that potentially generous measure,More broadly, consumer confidence is weak, domestic consumption remains muted, and unemployment among youth has surged, raising concerns about unrest and long-term stagnation, as the chart below shows:China’s economic model, long reliant on industrial production, has created a chronic overcapacity problem. Key sectors such as steel, electric vehicles, and solar panels produce far more than domestic and global markets can absorb. As just one example, Chinese factories produce twice as many solar panels annually as the world can install. This rampant oversupply has depressed prices, eroded profits, and caused many firms to rely heavily on government subsidies to stay afloa
China Economy Slowdown Overcapacity Consumption
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