0
A cartoon from a Chinese outlet depicting bankruptcy becoming an everyday occurrence in China's economy — a reflection of the country's economy struggling under multiple simultaneous headwinds. / Xinjing Bao

China's economy is showing clear signs of rapid slowdown, buffeted simultaneously by multiple headwinds — including a wave of bankruptcies sweeping nearly every industry except a handful like AI and semiconductors. As a result, in the worst-case scenario, China may fail to hit its growth target of 4.5-5% for the year.

According to recent accounts and reports from Beijing sources familiar with Chinese economic affairs and state media, China's economy managed to hold up reasonably well last year, growing 5.0% and just barely meeting its target despite headwinds like the property downturn and weak domestic demand. Riding that momentum, growth in the first quarter of this year came in strong again, at 5% year-on-year — helped by effective government measures such as subsidies under the "trade-in for new" (yijiuhuanxin) policy.

By the second quarter, though, that momentum hit its limits. Sentiment soured suddenly, with growth slowing to just 4.3% year-on-year — even with an eight-day Labor Day holiday in May, typically a huge boost to domestic consumption. It was only natural that both economic authorities and industry began worrying that hitting this year's growth target would be difficult if this trend continued.

The bigger problem is that momentum has shown no sign of turning around since. Looking at July's data, the first month of the third quarter, the reality becomes clear. Industrial output grew just 4.5% year-on-year, falling short of the 4.8% forecast by Reuters and other foreign outlets. Retail sales performed even worse, coming in well below the market forecast of 1.5%.

The outlook going forward is naturally far from positive, as multiple headwinds — including the bankruptcy wave — are simultaneously closing in on China's economy. The wave of bankruptcies, which has become something of a "new normal" for the broader Chinese economy, is now an almost daily occurrence across sectors like dining, automobiles, and finance. It's no exaggeration that around 2 million restaurants nationwide are expected to go bankrupt or shut down this year.

The simultaneous decline across power generation, crude oil, and coal supply also clearly confirms the negative outlook for China's economy going forward, with little sign of a turnaround likely anytime soon. Journalist-turned-economic commentator Gu Jinjun's assessment that industries need to make painstaking efforts, or energy demand is unlikely to suddenly rise, reflects a genuinely pessimistic read on the situation.

Also worth noting is the recent surge in instant noodle demand — a stark contrast to the broader consumption slump. If it's fair to interpret this as consumers hesitating even to spend money on food, that would be a rather telling paradox. Whatever else may be said, it seems clear that China's economy has reached a critical juncture.

                                                                                                            Hong Soon-do