The end of the COVID-19 restrictions and the reopening of China was accompanied by the hope that the Chinese economy would return to high growth rates in 2023 and return to being the engine of the world economy. In January 2023, The Economist even claimed that China's reopening is the most important economic event of the year. The data from the first quarter of the year supported the early predictions. However, the data for the second quarter of the year shows that the economic recovery from the pandemic has encountered a much lower ceiling than was initially expected.
Four figures can present part of the story of the Chinese economy:
1. The growth rate in the second quarter compared to the previous quarter was only 0.8 percent. Compared to the second quarter of 2022, which was greatly affected by the pandemic, the growth rate in the second quarter of 2023 is 6.3 percent, compared to the economists' forecasts of 7.3 percent.
2. Exports: dismal data such as that from the months of May (-7.5 percent) and June (-12.4 percent) have not been seen in China since the start of the COVID-19 crisis in the first quarter of 2020 and are quite unusual in the absence of a significant economic crisis. On a yearly basis, the Chinese export of goods declined in the first half of 2023 by 3.2 percent, compared to the corresponding period the previous year.
3. The consumer price index: While countries around the world are struggling with inflation, in China the problem is the opposite, and there is a fear of deflation.
4. Youth unemployment: The rise in youth unemployment in China breaks new records every month, and in June unemployment stood at 21.3 percent among the 16-24 age group. This figure is not only a product of the previous three figures but also the result of a gap created in China between the abilities of the workers and the needs and demands of the firms.
There are many explanations for the economic data from the first half of the year, including low demand outside of China and weak private consumption in China, but there is one conclusion: if the data from the second quarter is repeated in the second half of the year, China may well become the economic event of the year, as The Economist pointed out in January, but for negative reasons.
The end of the COVID-19 restrictions and the reopening of China was accompanied by the hope that the Chinese economy would return to high growth rates in 2023 and return to being the engine of the world economy. In January 2023, The Economist even claimed that China's reopening is the most important economic event of the year. The data from the first quarter of the year supported the early predictions. However, the data for the second quarter of the year shows that the economic recovery from the pandemic has encountered a much lower ceiling than was initially expected.
Four figures can present part of the story of the Chinese economy:
1. The growth rate in the second quarter compared to the previous quarter was only 0.8 percent. Compared to the second quarter of 2022, which was greatly affected by the pandemic, the growth rate in the second quarter of 2023 is 6.3 percent, compared to the economists' forecasts of 7.3 percent.
2. Exports: dismal data such as that from the months of May (-7.5 percent) and June (-12.4 percent) have not been seen in China since the start of the COVID-19 crisis in the first quarter of 2020 and are quite unusual in the absence of a significant economic crisis. On a yearly basis, the Chinese export of goods declined in the first half of 2023 by 3.2 percent, compared to the corresponding period the previous year.
3. The consumer price index: While countries around the world are struggling with inflation, in China the problem is the opposite, and there is a fear of deflation.
4. Youth unemployment: The rise in youth unemployment in China breaks new records every month, and in June unemployment stood at 21.3 percent among the 16-24 age group. This figure is not only a product of the previous three figures but also the result of a gap created in China between the abilities of the workers and the needs and demands of the firms.
There are many explanations for the economic data from the first half of the year, including low demand outside of China and weak private consumption in China, but there is one conclusion: if the data from the second quarter is repeated in the second half of the year, China may well become the economic event of the year, as The Economist pointed out in January, but for negative reasons.