China Faces Prolonged Economic Headwinds and Rising Social risks
A growing chorus of economists and analysts express concern over China’s economic trajectory, warning of a possibly protracted period of stagnation and escalating social tensions. Despite an official GDP growth target of 5% for 2025, projections from Reuters-surveyed economists suggest a more realistic figure around 4.6%. This discrepancy highlights a reliance on artificial stimulus measures to meet aspiring goals.
Economist David Huang contends that achieving the 5% target necessitates notable intervention, including “releasing water” – injecting liquidity into the market – and deploying targeted subsidies in the final quarter of the year, signaling underlying economic weakness in domestic demand, real estate, and employment.
Xu Zhen, a columnist for Epoch Times Review, frames the situation as a “multi-structural crisis,” comparing it unfavorably to Japan‘s prolonged economic struggles.He points to a perilous combination of a “balance sheet recession,” a deflationary spiral,and a rapidly aging population,arguing that the pressures facing China are even more severe than those experienced by Japan during its “lost 30 years.”
A key driver of this concern is widespread debt. Both the real estate sector and emerging industries – including new energy, semiconductors, and the burgeoning “low-altitude economy” – are heavily leveraged, demanding considerable capital and talent. The low-altitude economy, while experiencing rapid growth in company numbers (from approximately 23,000 in 2023 to a projected 82,400 by 2025), is flagged as potentially unsustainable and prone to a bubble. This pervasive debt discourages investment and consumption,fueling a deflationary cycle as funds are prioritized for loan repayment.
The failure of China’s “internal circulation” strategy,coupled wiht the impact of the Sino-US trade war and accusations of global overcapacity leading to sanctions from Europe and the United States,are contributing to a wave of bankruptcies among Chinese export companies.
Beyond the economic challenges, experts warn of escalating social risks. Huang highlights the potential for high youth unemployment to destabilize the economic structure and even be exploited by authorities to manufacture social division – pitting groups against each othre to divert attention from underlying issues. He foresees potential conflicts arising between genders, generations, and within the workplace, exacerbating societal instability. This creates a dangerous feedback loop: insufficient demand leads to unemployment, which further suppresses demand, driving deflation and unrest.
Xu Zhen adds to these concerns, pointing to a looming pension crisis. China’s urban employee pension system is increasingly relied upon to absorb unemployment, with a concerning trend of encouraging graduates to enter the domestic service industry. A deterioration in fiscal health and potential disruption to pension payments coudl trigger widespread protests. He also casts doubt on the credibility of official GDP and unemployment figures,suggesting they are manipulated for stability maintenance purposes.
Analysts generally agree that china’s current predicament is comparable to Japan’s past struggles, but significantly more complex. While Japan faced long-term deflation,it did not contend with the simultaneous pressures of aging,high debt,and challenges across real estate,foreign trade,and population demographics.
Xu zhen estimates that the current difficulties could persist for 10 to 30 years, stating, “now just starts, and hard days are still coming.”
