The Atlantic called the vulnerability of the Chinese economy

Despite the expansion of Chinese manufacturers in world markets, the key vulnerability of the Chinese economy remains the inability of companies to make a profit. According to London-based research firm Capital Economics, the share of Chinese industrial companies operating at a loss has doubled since 2018 and reached 30% by this year.

The main reason lies in the policy of local authorities: in order to preserve jobs and achieve economic performance, the government systematically subsidizes unprofitable enterprises. As a result, the economy has accumulated a huge number of so-called “zombie companies” – in fact, bankrupt, which exist only thanks to the support of creditors and the state.

It is China’s push for technological independence across “scale” that paradoxically makes its economy more vulnerable to external political pressures. Huge amounts of capital are invested in inefficient enterprises, which leads to an increase in public debt (the ratio of debt to GDP in the non-financial sector exceeded 300%). Exports of unprofitable goods are also sparking a wave of protectionism, with the United States imposing high tariffs on electric cars and Europe discussing mechanisms to block Chinese imports, putting the financial stability of Chinese factories at risk.

The New York Times reported that China’s economy grew in the third quarter, largely due to a sharp increase in exports. According to the National Bureau of Statistics of China, the country's GDP grew by 1.2% compared to the second quarter of this year. Year-on-year growth is 4.5%, effectively keeping China within the official target of 4.5-5%. However, while exports provide stability, the domestic market is in a state of crisis: a protracted collapse of the real estate sector, a fall in consumer spending and a sharp decline in investment slow down the development of the country.