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Yellen: Slowing Chinese Economy Could Be Bad News for US

© AP Photo / Pedro PardoU.S. Treasury Secretary Janet Yellen, left, shakes hands with China's Vice Premier He Lifeng during their meeting at the Diaoyutai State Guesthouse in Beijing
U.S. Treasury Secretary Janet Yellen, left, shakes hands with China's Vice Premier He Lifeng during their meeting at the Diaoyutai State Guesthouse in Beijing - Sputnik International, 1920, 18.07.2023
China's economy saw tremendous growth at the start of this year following the end of Covid lockdowns, but now that growth appears to be slowing.
US Treasury Secretary Janet Yellen has stated China's economic shortfalls could "spill over" to the United States after data revealed the Chinese gross domestic product recently fell below anticipated rates.
New figures detailed that the Chinese gross domestic product (GDP) only grew 6.3% during the second quarter of 2023, effectively failing to meet predictions that estimated the economy would grow by 6.8%.

“Many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia, and slow growth in China can have some negative spillovers for the United States,” Yellen said during an interview with US media. "Growth has slowed, but our labor market continues to be quite strong."

For comparison, the US GDP grew 2% during the first quarter of 2023. The numbers for the second quarter will be released next week but current estimates put it at 2.3%.
However, expectations matter, and China’s slower-than-expected growth has investors worried the Chinese economy may not be as strong as previously thought. China’s GDP increased by 2.2% in the first quarter of 2023 from the last quarter of 2022, spurred on by the end of China’s “zero-COVID” policy. But that rapid rise has soured, growing only 0.8% from the first to second quarters of 2023.
Yuan banknotes and US dollars are seen on a table in Yichang, central China's Hubei province on August 14, 2015 - Sputnik International, 1920, 16.05.2023
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“After a sugar injection in the opening months of 2023, the pandemic hangover is plaguing China’s recovery,” Harry Murphy Cruise, an economist at Moody’s Analytics, told Chinese media.
Overall, China’s economy is still beating Beijing’s 5% growth target for 2023, having grown 5.5% in the first six months of the year.
“[W]e might have to embrace a new wave of growth outlook downgrade in the next couple of days. However, the 5% growth target looks very attainable,” Zhou Hao, chief economist at Guotai Junan International, told Chinese media.
The slowing growth is blamed on a slumping retail market, dropping real estate prices and high unemployment among young people.
In June, 21.3% of Chinese people in the 16-24 demographic were unemployed, a record high. However, the overall unemployment rate in urban centers remained unchanged from May at 5.2%.
Countries that are more dependent on the Chinese economy are likely to feel the effects more prominently than the US, particularly neighboring Asian countries and Australia. While Yellen believes it could slow US growth as well, she says she does not expect a recession in the US this year.
 Treasury Secretary Janet Yellen listens, Sept. 15, 2022, in Lanham, Md.  Yellen is visiting Senegal with a message about the future of U.S.-Africa relations. - Sputnik International, 1920, 10.07.2023
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Yellen pointed to falling inflation rates and a labor market that has remained strong despite a historic rise in lending rates.
But there are signs the US may be on shaky ground. While inflation is at its lowest rate in two years, it still has not met the Federal Reserve’s goal of 2%. And while the labor market has surprised some by not collapsing in the face of the aforementioned interest rate rises, the economy added only 209,000 jobs in June, the lowest number since December 2020.
Interest rate hikes tend to ease inflation but also increase rates on consumer and business loans, potentially limiting hiring and consumer spending.
The Federal Reserve is expected to raise rates again next week. Already, interest rates have gone from near zero at the start of 2021 to 5%, the fastest rate hike since the 1980s.
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