China Problems 12-1-25

In December 2025, China faces problems including a slowing economy marked by a property sector crisis, high youth unemployment, deflationary pressures, and weak consumer confidence. Additionally, political and external risks such as potential US trade tariffs, government debt, and tightening political control over the economy present significant challenges to maintaining stability and growth, reports Bruegel.  

Economic challenges

Real estate crisis: The property sector is struggling, causing a slowdown in overall investment and exacerbating economic uncertainty.

High youth unemployment: Millions of young graduates face bleak job prospects, with high competition for stable roles and declining average starting salaries.

Deflationary pressures: Widespread overcapacity in manufacturing and weak domestic demand are contributing to falling producer prices and profits for many companies.

Weak consumer confidence: Stagnant wage growth and fragile labor market conditions are holding back consumer spending.

Monetary policy constraints: The People's Bank of China has limited room to ease monetary policy further due to concerns about the weak renminbi and the profitability of its banks.

Government debt: A 2025 debt package was announced to address local government financing strains, but the underlying issue of high corporate and municipal debt persists. 

Political and external challenges

External trade tensions: The threat of increased US tariffs could further hurt exporters, accelerate the relocation of production, and reduce profits.

Shifting priorities: The government's focus on security over economic growth and its political rigidity are seen as hindering the necessary economic reforms.

Economic policy constraints: The reliance on top-down, state-led intervention may not effectively address the structural economic problems, such as the lack of support for private enterprise.

Human rights concerns: The government continues to suppress dissent, with human rights defenders facing harassment, imprisonment, and other forms of repression, notes Human Rights Watch. 

In December 2025, China's primary problems are persistent economic challenges including a prolonged property crisis, weak domestic consumer confidence leading to deflationary pressures, high youth unemployment, and escalating geopolitical tensions and trade disputes with the United States and the European Union. 

Economic Issues

Property Market Crisis: The real estate sector, which accounts for a significant portion of China's GDP and household wealth, remains in a severe downturn. Major developers have defaulted, unsold housing inventory is high, and property values continue to fall, eroding consumer confidence and local government revenues.

Weak Domestic Consumption and Deflation: Chinese consumer confidence is weak, and households are saving more due to economic uncertainty, rather than spending. This muted demand is a key driver of deflationary pressures, with consumer inflation remaining very low or near zero.

Youth Unemployment: The jobless rate among young people, especially recent graduates, is high and a major concern, leading to frustration with their economic prospects and a surge in applications for stable government jobs.

High Debt and Overcapacity: China's growth model has resulted in massive debt burdens for local governments and a chronic overcapacity problem in key industries like steel, electric vehicles, and solar panels. This oversupply depresses prices and forces firms to rely on subsidies.

Insufficient Stimulus: While the government has implemented some stimulus measures, the efforts have been criticized for being too modest and producer-focused rather than consumer-focused, failing to address the structural issues driving weak domestic demand. 

Geopolitical and Trade Tensions

Trade Wars and Tariffs: The return of a protectionist US administration under Donald Trump has led to increased tariffs on Chinese goods, threatening China's export-driven economy. There are concerns that the EU and other trading partners may also impose more restrictions to protect their own industries from Chinese competition.

Global Decoupling: Geopolitical tensions are contributing to a more polarized world, with countries focusing on domestic growth and reducing reliance on Chinese supply chains, impacting China's global economic integration. 

Social and Human Rights Concerns

Tightened Social Control: The government under President Xi Jinping has intensified control and repression, curbing freedom of expression, religion, and assembly. This includes continued human rights abuses in Xinjiang and the erosion of civil liberties in Hong Kong.

Demographic Shifts: China faces a long-term problem of an aging population and a shrinking working-age population, which puts pressure on its social welfare and pension systems. 

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Norb Leahy, Dunwoody GA Tea Party Leader