At a Politburo meeting last month, China’s leaders referred to the economic recovery this year as “torturous”. You won’t often hear such candour coming from a Chinese Communist party institution, let alone such an elevated body. They were referring to current conditions, of course, but China’s problems reveal much that is systemically out of kilter in its economic and political system.
During the past few days, some of the statistics China has published have caused a stir. Consumer prices in July were lower than a year ago, suggesting it might be on the cusp of deflation, which reflects a chronic shortage of demand in the economy. And China’s foreign trade in the same month showed a sharp fall in exports due to weak global demand, with a sharper decline in imports signifying weakness in demand at home. There were murky factors affecting both but the message is that something more serious is amiss in China.
