published : 2023-08-21

Economic Woes in China: A Potential Global Threat

Record High Youth Unemployment in China: Potential Phases of Inflation in the US

An atmospheric shot of a bustling business district in Beijing, showing modern skyscrapers juxtaposed with traditional architecture, taken with Nikon D850.

Renowned economist, Ed Yardeni delves into how the teetering economic condition of China, projected to miss its 5% growth target this year, could spell hardship for some American businesses.

American companies, especially those heavily invested in China’s construction and manufacturing sectors, could feel the backlash from this economic downturn. China’s record high youth unemployment standing at over 20% exacerbates the situation, along with the burst of their property market bubble.

Recent attempts by China to steer their ailing economy included a surprising cut in their interest rates. Economists, however, warn that this measure may not suffice to significantly bolster the economy, and intensive slashes could lead to the Yuan's depreciation.

Tensions between President Biden and China's Xi Jinping continue to intensify amidst this fragile economic landscape. Despite the People's Bank of China cutting interest rates in a bid to invigorate lending and spur the economy, some believe these efforts remain insufficient.

A close-up portrait of President Xi Jinping during a press conference, his expression capturing the tensions inherent in the situation, taken with Canon EOS 5D Mark IV.

With a shift of focus to military and national defense, it seems China is putting economic growth on the back burner. This has led some economists to believe that China is placing national security and technological self-sufficiency above economic performance.

China's choice of 'total ideological control' over economic progress complicates the issue further, with stability of the regime taking precedence over the country's fiscal health.

The continuous decline in China's economic state can be attributed to a range of political missteps, intensified by the country's draconian COVID-19 measures and the intensifying US-China trade war.

An atmosphere of malaise not only pervades China's economy but its social fabric as well, with escalating unemployment among young people, rising provincial and local debt, reduced foreign investments, and stagnating global purchasing demand.

A busy port in Shanghai, with containers and cranes in view, representing the vibrant trade and stark realities of China's economic landscape, taken with Sony A7R IV.

Erin Walsh warns that the economic maelstrom China is facing also poses significant risks to American companies doing substantial business with the nation. It's time such enterprises consider diversifying their markets to minimize their exposure risk.

Despite the dire outlook, according to Erin Walsh, while China's economic downslide may not greatly impact the US, the world's largest and most resilient economy, other countries heavily reliant on China for trade might face substantial economic distress.