### Is China's Economic Miracle Coming to an End? Five Key Indicators Point to Trouble

China's remarkable economic progress over recent decades increasingly appears to be faltering. The ruling Communist Party is attempting to navigate through persistent economic challenges while stifling criticism. Five significant issues threaten to impede China’s growth prospects for the foreseeable future.

In April, Zhu Hengpeng, vice director of the Economics Institute at the Chinese Academy of Social Sciences, reportedly made critical comments about China's economy and the economic expertise of President Xi Jinping in a private chat. Soon after, Zhu vanished from public view, and his name was removed from the academy's employee roster. This is not an isolated incident; other economists have also been reportedly coerced into providing a more positive outlook on the economic situation, despite mounting evidence to the contrary.

At the end of 2022, there was a glimmer of hope that China's economy would rebound swiftly after the stringent zero-COVID policies were lifted. However, a prolonged economic slump has set in, suggesting that this downturn might not be just a temporary phase. The government has set a growth target of 5% for the year, but recent economic data show this goal may be increasingly unrealistic. Despite efforts including significant financial support to lift investor mood, long-term structural problems could derail these attempts.

### Weak Domestic Demand

China's economic growth in the past was largely driven by massive investments in infrastructure and real estate. However, this model, particularly in the real estate sector, is showing signs of strain. Analysts have long advised Beijing to stimulate internal demand, yet Chinese citizens continue to save a significant portion of their income for potential emergencies and retirement rather than spending. This cautious spending behavior worsened during the COVID-19 pandemic, and consumer confidence has yet to recover. Alarmingly, the birth rate has also plummeted from 1.5 to 1.0 children per woman between 2019 and 2023, reflecting a deeper societal concern about the future.

### Over-Indebted Local Administrations

China's local governments are in financial distress, partly due to the central government's costly pandemic control measures and a collapsing real estate market that once reliably filled local coffers. Many local governments are nearing insolvency, leading the central government to deploy interest rate cuts and other financial assistance.

### Real Estate Crisis

For decades, real estate development was a lucrative venture in China, contributing to a significant portion of the country's gross domestic product. However, major developers like Evergrande have encountered severe financial trouble, halting projects and escalating the crisis. This has disrupted the investment-driven growth model and sapped public confidence, further dampening consumer spending.

### Youth Unemployment

Youth unemployment is a pressing issue, with nearly 20% of 16- to 24-year-olds jobless. This situation is exacerbated by the broader economic challenges and specific troubles in sectors such as technology, where government restrictions have stunted growth. The tech sector, once a robust employer for young graduates, is now struggling due to these policy decisions.

### International Trade Wars

As domestic demand remains weak, Chinese companies are increasingly looking to foreign markets, selling goods at competitive prices. While this has benefited certain sectors, it has also led to international trade disputes. The U.S., the EU, Turkey, and Brazil have imposed protective tariffs against Chinese goods, risking further isolation of China's industrial base.

These intertwined issues underscore the challenges facing China's economy, casting doubt on whether it can maintain its once-miraculous growth. Some experts are drawing parallels to Japan's prolonged stagnation following its economic boom in the 1980s. While Zhu Hengpeng’s critical remarks remain silenced, the question of whether policy changes could reignite China’s economic miracle remains unanswered.