China's True Growth Questioned as Property Slump Drives Export Surge

New analysis of the Chinese economy suggests that its actual growth rate may be significantly lower than the 4.7% officially reported for the first half of the year. Research from Rhodium Group indicates that aggregate growth has likely been in the 1.5% to 2% range over the last four years. The report points to a massive collapse in the property sector—which previously accounted for 25% of the economy—as the primary drag that official figures are failing to fully capture.

China's domestic demand remains nearly flat, with retail sales growth hovering at just 1%. This has left the country heavily reliant on external demand, leading to a record $1.2 trillion trade surplus. The surge in exports of electric vehicles, batteries, and solar panels is being viewed by the rest of the world as 'exporting deflationary pressure' and 'deindustrialization,' prompting many nations to consider protective trade measures to insulate their own industries.

The property crisis is exemplified by the downfall of firms like Evergrande, which at its peak carried debt equivalent to the GDP of Finland. Housing starts are down 77% from their peaks, and the lack of domestic sales has forced manufacturers to dump products on global markets at lower prices. This investment-led model is facing a 'boom and bust' cycle that some analysts suggest is the largest in at least a century.

As China's share of global exports is projected to rise further by 2030, the global response will be critical. The tension between China's need to export its way out of a domestic slowdown and the West's desire to protect its manufacturing base is expected to be a dominant theme in international trade relations for the foreseeable future. The report concludes that China's 'animal spirits' are low, and without significant domestic reform, the reliance on external demand will only deepen.