Chinese economy in distress, its model is ‘broken’: report

China's economy in deep distress; model of growth for 40 years "broken"; signs of trouble extend beyond dismal data; debt at 300% of GDP; Xi Jinping warned against relying on borrowing for construction; GDP grew 5.5% in H1 2023; LPR trimmed to 3.45% to revive growth.

China's economy, the world's second-largest, is now in deep distress and its successful model of growth for 40 years stands “broken”, a prominent American financial publication has said, noting that signs of trouble extend beyond China's dismal economic data to distant provinces.

TheWall Street Journal in a major Sunday story wrote that economists now believe China is entering an era of much slower growth, made worse by unfavourable demographics and a widening divide with the U.S. and its allies, which is jeopardising foreign investment and trade.

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Rather than just a period of economic weakness, this could be the dimming of a long era, it commented.

"Now the (economic) model is broken," the financial daily said.

“We’re witnessing a gearshift in what has been the most dramatic trajectory in economic history,” Adam Tooze, a Columbia University history professor who specialises in economic crises, was quoted as saying by The Wall Street Journal.

According to the report, the total debt, including that held by various levels of government and state-owned companies, climbed to nearly 300% of China’s GDP as of 2022, surpassing U.S. levels and up from less than 200% in 2012, according to Bank for International Settlements data.