China - Facing the business cycle: when planning meets doubt
- 17.07.2025
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- Building growth: what figures, what contributions?
- Deflation sets in, what is the symptom?
- An economy undergoing public infusion
- With the United States, the risk is anticipated, but not necessarily controlled
- Conclusion
In summary
Chinese growth is slowing down and consensus remains sceptical about the government's official targets (5% in 2025). Far from the promises of rebalancing, the economy is increasingly shifting towards an export-driven industrial model rather than domestic consumption. Deflation, a consequence of structural imbalances (demographics, overcapacity, real estate crisis), is weakening corporate profitability and consumption and weighing on potential growth.
The state remains at the heart of the productive model, its upgrading, its successes as well as its excesses and sluggishness, but it distorts the economy by favouring supply over demand and supporting a model that creates overcapacity, which the world views with increasing mistrust. Faced with the looming trade war, China will have to fight to maintain its market share and, above all, overcome a technological blockade imposed by the United States in key sectors where it remains dependent.
The energy transition is accelerating for ecological, geopolitical and economic reasons, but is hampered by the pursuit of quantitative growth. Despite its manufacturing performance, the future of the Chinese model remains uncertain, against a backdrop of statistical and political opacity.
The debate surrounding the reliability of Chinese statistics is not new, but has resurfaced with renewed vigour since Covid-19. The removal or modification of the methodology used to calculate certain indicators – such as youth unemployment, but also many sub-indicators of sectoral production or related to the real estate sector – has reinforced the impression of a "statistical black box" surrounding China. A representative example is the number of defaults on the non-sovereign bond market, which has fallen significantly over the past year, even though many companies are in difficulty. This suggests that the authorities prefer to resolve problems upstream rather than engage in restructuring procedures, which are still rather vague.
Sophie WIEVIORKA, Economiste - Asie (hors Japon)