China's economy is once again treading a familiar path — from hope to anxiety. A new report from Yardeni Research paints a picture where debt, deflation, and demographic decline converge into a single, persistent trend: economic growth is slowing, confidence is waning, and the phrase "stimulating demand" is growing increasingly unconvincing.
China remains reliant on exports. Efforts to awaken domestic consumption seem polite yet futile. Analysts point out that the country continues to "depend on external demand," and the surplus in production spills over into accusations of dumping in global markets. This has heightened tensions with the US, but it seems to come as no surprise to anyone anymore.
The real estate market remains a weak spot. New housing prices have fallen for the 26th consecutive month — down 2.2% year-on-year. A sector that was once a symbol of Chinese success is now dragging down consumer confidence and investor sentiment.
Retail sales are growing at a modest 3%, the lowest figure in a year. Even adjusted for deflation, it amounts to only 3.8%, which is still below industrial production growth. This is a pure paradox: the country is producing more but buying less.
The People's Bank of China is trying to revitalize the economy through classic measures — cutting interest rates and reserve requirements. However, the credit impulse is weakening: the growth of bank loans has dropped to 6.6%, nearly half of what it was three years ago. Total debt has reached $38 trillion — a figure that would likely cause even Beijing officials to take a deep breath.
Bond yields are below 2%, sending a clear message: faith in recovery is still fragile. The stock market is characterized by volatility and muted optimism. Major stock indices are treading water, although the FTSE China has skyrocketed by 34.7% since the beginning of the year, proving that even stagnation can be selective.
Investors are searching for bright spots: commodity companies have gained 77%, the healthcare sector has risen by 67%, and the consumer goods sector has increased by nearly 50%. These sectors are performing better than the economy as a whole — and perhaps this is its main problem.
Yardeni Research summarizes without excessive diplomacy: an aging population, debt, and weak credit growth make the bet on domestic consumption nearly a utopia. Beijing sought to replace its export model with domestic demand, but it currently appears that the authorities simply replaced one dependency with another — on stimulus and hope.
