China’s economy is heavily dependent on manufacturing and exports, but inflation and COVID restrictions have disrupted the status quo. To give you a better understanding of what’s going on and what we expect to happen in the future, our experienced Kiplinger Letter team will keep you updated on the latest developments and forecasts (Get a free copy of The Kiplinger Letter or subscribe). With a subscription you will get all breaking news first, but many (but not all) forecasts will be published online a few days later. Here’s the latest…
China’s economy is losing momentum on slowing external demand after growing 4.5% in the first quarter due to the end of COVID restrictions. Manufacturing activity fell even deeper into the decline in May. Meanwhile, activity in the services and construction sectors fell sharply during the month. Exports fell in May as consumers around the world cut back on the goods they wanted but didn’t necessarily need.
The Chinese real estate market remains a major brake on growth. Home sales are weak, inflation has slowed and housing starts have continued to fall. Excessive debt and excessive construction by developers for several years have led to debt stress in the real estate sector and vacant housing in many Chinese cities. These problems mean Beijing cannot use its old strategy of housing support to boost the economy.
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A host of stimulus measures are in the works to boost growth: new spending on infrastructure projects and lower interest rates to support lending.
Despite China’s economic woes, its retailers are thriving on fast fashion, the trend to cater to rapidly changing consumer tastes in clothing. Once the likes of Uniqlo, H&M and Zara dominated, but online-only retailers from China Shein, Temu and AliExpress, a subsidiary of retailer Alibaba, are gaining ground. The fast fashion industry has drawn a lot of criticism because it tends to use cheap fabrics for clothes that are thrown away when they go out of style, but Chinese retailers appear to be well-suited to the business model.
This forecast first appeared in the Kiplinger Letter, published since 1923, which is a collection of concise weekly forecasts of business and economic trends and expectations in Washington to help you better understand what’s ahead and how to make the most of your investments and your Money. Subscribe to the Kiplinger letter.
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