China’s Economy Grew Last Year, but Strains Lurk Behind the Numbers

Car production set records in China last year. Restaurants and hotels were increasingly full. Construction of new factories surged.

Yet China’s economic strengths conceal weaknesses. Deep discounts helped drive car sales, particularly for electric cars. Diners and travelers chose cheaper dishes and less expensive hotels. Many factories ran at half capacity or less because of weak demand inside China, and are working to export more to make up for it.

China’s economy grew 5.2 percent last year as it rebounded from nearly three years of stringent “zero Covid” pandemic control measures, the country’s National Bureau of Statistics announced on Wednesday. During the final three months of the year, output rose at an annual pace of 4.1 percent.

Longer term, China’s growth is slowing. High debt, a housing crisis that has undermined confidence, and a shrinking and aging work force are weighing on output.

Western economists predict that growth will be 4.5 percent or less this year, the result not of a cyclical downturn but of a grinding decline that may endure for many years, what economists label secular stagnation. Prices are gradually falling to an extent that China hadn’t experienced since the jolt inflicted by the global financial crisis in 2009, a phenomenon known as deflation that could bankrupt heavily indebted families and companies.

“Secular stagnation — basically a chronic excess of savings leading to slow growth, deflation, asset bubbles and financial strains — has moved from the Western Hemisphere to China,” Lawrence H. Summers, a former secretary of the Treasury, said in an interview last week in Shanghai.