There are five reasons China’s economy is struggling.

Official growth data for the July to September quarter are forthcoming; if the second-largest economy in the world experiences a decline, the likelihood of a worldwide recession rises. Beijing’s target of 5.5% annual growth is currently unattainable, despite the fact that officials have minimized the importance of achieving the goal. China nearly missed experiencing a contraction from April to June. Some economists predict no growth this year.

The nation may not be experiencing severe inflation like the US and UK, but it does have other issues. The world’s factory has unexpectedly discovered fewer buyers for its goods both locally and abroad. Growth is also being hampered by trade conflicts between big economies like the US and China.

And as it falls sharply against the US dollar, the yuan is on track to have its worst year in decades. Investor trepidation caused by a weak currency feeds uncertainty on the financial markets. Additionally, it makes it challenging for the central bank to inject cash into the economy.

The stakes are particularly high for President Xi Jinping at this time since the Communist Party Congress (CPC), which starts on October 16, is expected to grant him an unprecedented third term.

So what specifically went wrong?

1. Chaos is being caused by Zero Covid

Covid outbreaks have hampered economic activity across industries in a number of cities, including manufacturing areas like Shenzhen and Tianjin.

Major services are under pressure because people are also not spending money on items like food and drink, retail, or tourism.

According to the National Bureau of Statistics, factory activity in the manufacturing sector looks to have increased again in September.

The government’s increased investment in infrastructure may be the source of the resurgence.

However, it did so two months after there had been no growth in production. And it has sparked concerns, particularly in light of a private poll that revealed a decline in manufacturing activity in September as a result of the impact of demand on output, new orders, and employment.

Due to increasing interest rates, inflation, and the crisis in Ukraine, demand has decreased in nations like the US as well.

China’s Xi faces danger from Zero Covid

Beijing might stimulate the economy further, according to experts, but there is little incentive to do so until zero Covid ends.

According to Louis Kuijs, chief Asia economist at S&P Global Ratings, “there is not much purpose in injecting money into our economy if businesses cannot develop or people cannot spend the money.”

This involves increasing infrastructure spending, lowering borrowing requirements for homebuyers, real estate investors, and local governments, as well as providing tax breaks for individuals.

According to Mr. Kuijs, “the government’s response to the economic downturn has been rather limited compared to what we have seen during prior economic downturns.”