As Chinese economy slows, experts say there will be ‘problems for Beijing’

China's economic expansion decelerated sharply in the second quarter, posting growth of 4.3 percent—a significant decline from the previous quarter's 5 percent and the slowest pace in more than three years. The slowdown underscores a fundamental imbalance in the country's growth model, which relies heavily on export-driven expansion while domestic consumption remains subdued.

Exports have surged, with June shipments jumping 27 percent year-over-year, buoyed by demand for artificial intelligence products and electric vehicles. This export strength generated a trade surplus of $125.6 billion in June, up from $105.4 billion the previous month. However, this export boom masks deeper structural weaknesses. Domestic consumption has stalled as Chinese households, burned by losses in the real estate sector and the COVID-19 pandemic, have become increasingly conservative with spending and prioritize saving over consumption.

The real estate collapse has been particularly damaging, as many Chinese citizens had concentrated their wealth in property investments. This sector, built on speculative dynamics, experienced massive losses in recent years, eroding household savings and confidence. Simultaneously, job creation has lagged behind export growth, leaving workers squeezed and young people—particularly those under 25—facing diminished employment prospects and depressed incomes.

Analysts warn that this trajectory poses risks for Beijing. The export-led model, while currently robust, places pressure on China's trading partners and creates domestic vulnerabilities. If the country continues prioritizing technology exports over domestic growth, economic challenges will likely spread across broader age cohorts and income groups, potentially creating political and social pressures for the government.