{
    "success": true,
    "data": {
        "id": 1863753,
        "msgid": "behind-chinas-economic-slowdown-a-danger-that-cannot-be-ignored-1784206325",
        "date": "2026-07-16 18:50:05",
        "title": "Behind China's Economic Slowdown, a Danger That Cannot Be Ignored",
        "author": "",
        "source": "CNBC",
        "tags": "",
        "topic": "Economy",
        "summary": "China's trade surplus, a crucial buffer for its slowing economy, is showing signs of peaking as import costs, particularly for semiconductors, surge faster than exports. This narrowing surplus comes as GDP growth weakens and the government inadvertently tightens fiscal policy through increased tax revenues. The shift forces Beijing to increase social spending to manage domestic pressures, even as it relies on exports to sustain growth.",
        "content": "<p>China\u2019s economy is sending a rather anomalous signal. From the\noutside, the trade performance of the Bamboo Curtain country still looks\nvery strong. Exports in June 2026 surged by more than a quarter\nyear-on-year in US dollar terms. Such a rise in exports is usually good\nnews. Moreover, China\u2019s economy is slowing, domestic consumption is not\nyet strong, and investment remains under pressure. External demand is\none of the main pillars keeping China\u2019s factories moving. However, there\nis another story behind the export surge. Citing The Economist, China\u2019s\ntrade surplus is actually starting to show signs of having peaked. Adam\nWolfe from Absolute Strategy Research assesses that the large gap\nbetween China\u2019s exports and imports is no longer widening as it did\nbefore. The cause is that China\u2019s imports are rising faster than\nexports. In June 2026, China\u2019s imports grew 36% year-on-year. This\nincrease caused China\u2019s trade surplus in the first half of 2026 to be\nlower in US dollar terms compared to the same period the previous year.\nThis condition is a surprise because the trade surplus has been one of\nthe main cushions for China\u2019s economy. When domestic consumption is weak\nand the property sector is still troubled, exports help China maintain\ngrowth. Last year, China\u2019s trade surplus even exceeded US$1.2 trillion.\nThat figure made many countries, especially the European Union, worry\nabout a second \u2018China shock\u2019 wave, similar to the period after China\njoined the World Trade Organisation in 2001. At that time, cheap goods\nfrom China flooded the global market and changed the industrial map of\nmany countries. Similar concerns are now re-emerging, especially because\nChina\u2019s exports are no longer just cheap goods, but also machinery,\nvehicles, electronics, and technology products. However, the latest data\nshows a more complicated picture. Exports are indeed still strong, but\nimports are also surging faster. This is causing China\u2019s trade surplus\nto narrow. The Iran war has indeed affected China\u2019s trade data. More\nexpensive oil prices mean China has to pay more for energy imports than\nlast year. However, the oil factor is not the main cause of the\nnarrowing trade surplus. China is paying more for oil, but the country\nhas also sharply cut its oil import volume. A bigger factor actually\ncomes from chips. China has long been known as a major exporter of\nsemiconductor products. However, at the same time, China is also still a\nmajor importer of these components. In May 2026, the import value of\nChina\u2019s integrated circuits rose about 70% year-on-year in US dollar\nterms. The increase was not due to a surge in volume, but because chip\nprices were more expensive. So, even though China\u2019s exports remain\nstrong, the cost of importing important components like chips also rises\nand pressures the trade surplus. This shows China\u2019s true position. On\none hand, the country is a technology manufacturing giant. On the other\nhand, its industrial supply chain still requires imports for important\ncomponents. This condition arises when China\u2019s economy is losing steam.\nChina\u2019s GDP in the second quarter of 2026 only grew 4.3% year-on-year.\nThis figure is slower than expected and is the weakest since 2022, when\nChina was still implementing lockdowns due to Covid-19. This achievement\nis also below China\u2019s growth target for this year, which is set in the\nrange of 4.5%-5%. Because household consumption is not yet strong and\ninvestment is still weak, exports are becoming increasingly important.\nThe problem is, if the trade surplus has truly peaked, then one of the\nmain pillars of China\u2019s economy is starting to lose power. This puts\nBeijing in a difficult position. China needs exports to maintain growth,\nbut overly strong exports also trigger tensions with trading partners.\nAt the same time, surging imports, especially due to chips, mean the\ntrade surplus is no longer as large as before. China\u2019s dependence on\nexports has long been a concern. Therefore, many analysts hope Beijing\nwill again push fiscal stimulus to boost domestic spending. However, the\nopposite is happening. Yu Xiangrong and Ji Xinyu, economists at\nCitigroup, say China is entering a condition of de facto austerity. The\nsign is seen from strongly rising tax revenues. In the January-May 2026\nperiod, China\u2019s VAT revenue grew 6.2%, personal income tax rose 12.2%,\nwhile stamp duty soared 89% due to busy stock trading. This increase in\nrevenue was also driven by inflation and stricter tax enforcement. Since\nlast year, China\u2019s tax authorities have been sending automatic messages\nto taxpayers to report overseas income and assets from 2022. As a\nresult, even though the central government is spending more money, state\nrevenues are also rising. The combined deficit of the central and local\ngovernments has even narrowed slightly over the last 12 months. This is\nthe opposite of what a weakening economy needs. When domestic demand is\nsluggish, China is moving tighter, not looser. The direction of\ngovernment spending is also interesting. President Xi Jinping has been\npushing for high-tech manufacturing and new productive forces, but\nsocial spending is actually getting larger. According to Citigroup\neconomists, the portion of spending on social security has increased in\nrecent years. This includes spending on pensions, unemployment\ninsurance, poverty alleviation aid, and programmes to help people return\nto work. Meanwhile, the portion of spending on technology and education\nis relatively stable. Infrastructure spending has actually declined.\nThis condition shows unavoidable pressure.<\/p>",
        "url": "https:\/\/jawawa.id\/newsitem\/behind-chinas-economic-slowdown-a-danger-that-cannot-be-ignored-1784206325",
        "image": ""
    },
    "sponsor": "Okusi Associates",
    "sponsor_url": "https:\/\/okusiassociates.com"
}