Is China's economy in trouble?

Data from China shows that the world’s second-largest economy is slowing down — especially around consumer spending.

The official jobless rate ticked up to 5.2% — though other estimates put the real unemployment rate at 10.2%. Meanwhile, retail sales grew just 0.6% in a year. When an economy of China’s size gets the sniffles, all the others should probably pay attention.

Overall investment in the Chinese economy, by one measure, shrank by 6.7% in a year.

“We haven’t seen anything like that outside of COVID,” said Logan Wright, a partner at Rhodium Group and the author of the upcoming book “Broken China.” “Household consumption appears to be weakening pretty significantly … and that reflects the weakness in China’s employment and income growth at this point.”

Growth and income in China are uneven, according to Wright.

“They have been focused on advanced technologies which are capital-intensive,” he said.

Which is great for robots — industrial robot production shot up 30% in a year — but not as great for regular folks.

Some of these economic problems are part of a long and painful hangover from China’s housing bubble, which is still weighing on people.

“Just like here, right?” said Jennifer Lee, a senior economist at BMO Capital Markets. “If your home — which is your biggest asset — continues to lose value month after month after month, it’s going to continue to hurt your confidence. It’s like: you know what, do I really need to go out and spend more? Do I need to travel that much?”

The thing that inflated that housing bubble in the first place hasn’t fully gone away. All the industrial capacity that blew up — fueled by subsidies and cheap credit — is still there. Sometimes, it’s on life support, but it’s definitely still around, according to Wright. It is still making stuff and looking for somewhere to sell it.

“There’s no domestic demand,” Wright said, “so, you end up exporting.”

Exporting at very, very low prices. China’s exports have exploded 24% in a year despite tariffs.

“And the reason that’s a problem is China is a very, very large economy,” said Jay Shambaugh, an economics professor at The George Washington University. “It’s the largest manufacturing economy in the world, and if it is depending on the rest of the world for growth, that’s something that starts to displace economic activity in other places.”

Cheap goods help consumers around the world, but they can also wipe out competing industries around the world. So, China is exporting more goods, and with them, problems.