China’s economy in 4 terrifying charts

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Australian investment bank Macquarie’s “Macro Monday” note on China presents a worrying snapshot of the country’s economy. Headlines have been dominated by the country’s recent stock market collapse, which so far hasn’t spilled over to the wider economy. But, as Macquarie points out, that’s just one of several big issues facing China right now. Here are 4 of the scariest charts:

1. Chinese stocks slumped 10% last
week

Macquarie

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Despite huge levels of intervention from Beijing , stock markets are still diving. Last week alone the benchmark Shanghai Composite fell 10%. Between its peak in June and its low in July the index collapsed over 30%.

Clearly there’s still a huge issue with stock markets right now and that’s a big problem for the government. Millions of ordinary Chinese investors have money tied up in shares and there are fears that if the slump gets any worse it could threaten “social stability.”

2. Exports are dead and investment and
consumption are dying

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The chart above shows the makeup of China’s GDP growth and pretty much everything is falling. Exports, which played a big part in GDP between 2005 and 2007, died in 2009 and don’t look like coming back. Meanwhile investment and consumption — ordinary Chinese spending money on things — are both also shrinking.

3. …and GDP growth is slowing

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Given that all the components of GDP are contracting, it’s no surprise that GDP growth is falling and predicted to keep shrinking. Economists also expect China to miss its projected growth targets and sceptics also believe China’s growth figures are inflated.

4. China’s population is getting older

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To make matters worse, China’s working age population has peaked— the percentage of people aged 15-64 is set to decline over the next 50 years. The means there’ll be fewer people to drive GDP growth and more people depending on GDP growth to service their pensions and healthcare. Not a good combination.
So in conclusion — millions of ordinary Chinese people are caught up in a stock market crisis that could destroying their savings. Meanwhile, consumption is already shrinking, in part causing a slowdown in China’s GDP growth.

And that’s unlikely to pick up in the long run because China is sitting on a demographic timebomb that will lead to higher outgoings.

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