Eswar Prasad warns China's growth model is imbalanced as the economy slows in the second quarter.
China’s economy slowed to a 4.3% annualized growth rate in the second quarter, a figure falling below forecasts and official targets. The downturn highlights an increasing imbalance between robust exports and lagging domestic consumer spending and investment. While exports remain strong, bolstered by demand for high-tech goods like electric vehicles, signs of structural weakness persist. Analysts note that domestic spending has been constrained by a prolonged property market slump. Investment in fixed assets dropped 5.7% year-on-year, signaling that traditional economic pillars are weakening. According to Eswar Prasad, a professor of economics and trade policy at Cornell University, China’s growth model is becoming unsustainable by relying so heavily on external trade. The disparity points to a gap where advanced technology sectors drive foreign sales while consumer appetite remains low at home. Despite an uptick in international demand, persistent weakness in domestic consumption and real estate investment raises questions about future stability. The government faces the challenge of balancing its focus on advanced technologies while stimulating resilient internal demand.