China’s economy, which is the second largest in the world, is now facing deep distress and its fortunate model of growth for 40 years stands ‘broken’, according to a well-known American financial publication. It has stated that signs of trouble extend beyond China’s dismal economic data to distant provinces.

China's damaged economic situation and the impact it has had on the country’s market have formed an environment of fear globally, significantly decreasing the scope of foreign investment.

The Wall Street Journal in a major Sunday story noted that the economists now believe China is entering an era of much slower growth, made worse by the unfavourable demographics and a widening divide with the US and its allies, which is jeopardizing foreign investment and trade. Rather than just a periodic economic weakness, this could be a 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”, a specialist in economic crises Adam Tooze, a Columbian University history professor, was quoted as saying by the Wall Street Journal.

The senior officials in China have recognized that the growth model of the past decades has reached its limits, the Daily wrote.

According to the report, the total debt, including that held by various levels of government and stated own companies, climbed nearly 300 per cent of China’s GDP(Gross Domestic Product) as of 2022, surpassing US levels and up from less than 200 per cent in 2012, according to Bank For International Settlements Data.

Chinese President Xi Jinping in a speech to new generation party leaders last year, blamed and targeted the officials for relying on borrowing for the construction to expand economic activities, it added.

According to a report from the Chinese National Bureau of Statistics (NBS) in June, the country’s GDP grew 5.5 per cent year-on-year in the first half of 2023.

China’s GDP reached 59.3 trillion Yuan ( about 8.3 trillion US dollars) in the first half according to NBS data. In the second half, the country's GDP expanded 6.3 per cent year on year, China's official media quoted the NBS saying. China faces a risk of an astronomical rise in debt. China’s total debt to GDP ratio stood at a record 279 in the first quarter of 2023, according to a Bloomberg analysis.

According to experts, this high debt is the result of over-investments in the infrastructure and property market for years.

Reason for the collapse

The world’s second-largest economy is not growing, trading, or producing as much as it usually does.

Beijing is grappling with declining trade and foreign investment.

Bloomberg estimates total household, business, and government debt at about 282% of annual economic output.

Year-to-date, China’s exports are down 5% compared to last year, while imports have dipped 7.6%

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