The economic effects of the pandemic obscured the underlying problems, but developments in 2022 underlined the structural nature of China’s slowdown. In its current trajectory, China’s economic growth will continue to grind ever slower.
During the second quarter of 2023 slow growth has caused the rhetoric around Chinese economic reform to turn more practical, but concrete actions have been insufficient. Without those structural reforms, systemic challenges have grown.
In Q1 2023 China reopened its borders and rolled out the rhetorical welcome mat for foreign investors. However, a public campaign to allay concerns about the direction of China’s economy has not been underpinned by a convincing shift in policy.
During the second half of 2022 China veered from one extreme to the other, with carefully choreographed control followed by sudden turmoil. Throughout, the Chinese government has continued to claim that the path it has chosen for China’s economy is the only right one.
Over the year, teams from the Atlantic Council GeoEconomics Center and Rhodium Group have taken a data-driven dive into China’s economy to address a fundamental question: Is the Chinese economic system becoming more or less like other open-market economies?
In Q2 2022 China’s economic growth slowed to 0.4% YoY, despite aggressive steps to support companies, boost consumption, and address youth unemployment. These measures amounted to short-term firefighting and do not address structural issues slowing Chinese growth.
The Chinese economy slowed and its economic system moved away from market economy norms in Q1 2022. Shanghai’s zero-COVID lockdown, a crackdown on technology firms, and deteriorating prospects in the property sector are key factors.
China moved farther from market economy norms in Q4 2021. Chinese authorities were active in four of the six economic clusters that make up the China Pathfinder framework: financial system development, competition policy, innovation, and portfolio investment openness.
In Q3 2021, a Chinese economy already straining under COVID was rocked by energy shortages, while Evergrande, the country’s largest real estate developer, inched toward a full-blown debt crisis. Beijing also broadened its crackdown on tech giants, worsening investor sentiment
Atlantic Council GeoEconomics Center Senior Director Josh Lipsky’s Big Story unpacks the key themes inside the data and what it means for China’s economy past, present, and future. Explore the interactive narrative and see the challenges facing China’s economy.