Is China’s economy broken?

**SPEAKER_2** (0:02)
This is a podcast by The Straits Times.

**Bhagyashree Garekar** (0:11)
Hello, and welcome to Asian Insider. I'm your host, Bhagyashree Garekar, and we're recording this episode on Tuesday, the 14th of July, 2026
Our guest today is an expert on the world's largest economy, that is China.
Dr. Logan Wright is a partner at the Rhodium Group, which is an American research and advisory firm. Logan is speaking to us from Washington, DC. He has previously worked in Beijing and Hong Kong for more than two decades. He's also the author of a book that has China watchers excited, even though it's not yet released. We'll be talking about his book. Welcome, Logan.

**Logan Wright** (0:50)
Thank you very much. Happy to be here.

**Bhagyashree Garekar** (0:54)
The story we're hearing about the Chinese economy at the moment is that it's expected to be growing at 4.5-5 percent, which sounds pretty good, but it is the lowest since 1991, I'll just note.
And in a matter of hours, China is going to be releasing its report card for the second quarter of this year.
Analysts say they expect to see a figure that's closer to 4.5 percent than 5 percent. What's your take, Logan, on the China growth story?

**Logan Wright** (1:23)
We think that growth is much, much lower than where Beijing has been reporting it ever since the weakness in the property sector really intensified starting in 2022
So we think that growth right now in the economy is close to probably just barely above zero, probably zero to 1 percent or so, and that the gap between Beijing's stated growth rates in the economy and actual economic performance is widening considerably. The disruptions from the Iran War have been considerable, not just because of shortages in fuel, which you haven't really seen, but because China's economy has such weak domestic demand that they cannot absorb higher input costs, and so the result has been weakness in output and weakness in domestic consumption. The headline fixed asset investment growth rate through May is negative for the full year. Retail sales has been negative in the second quarter, negative 0.6 percent is probably close to zero. That's China's key indicator of headline consumption. So that would suggest that domestic demand growth in China broadly is very close to zero or slightly negative.

**Bhagyashree Garekar** (2:35)
So that sounds like a pretty extreme scenario, you know, zero percent, whereas the government is talking of 4.5 to 5 percent. So I have two questions. Firstly, is yours is a minority opinion?
Or is it, you know, gaining ground among the US establishment or community?

**Logan Wright** (2:55)
I think we're unique simply because we're willing to put numbers on the degree of the distortion. I don't think there's any real, I think there's a widespread consensus that China's economic data overstates its economic growth, especially in terms of real GDP.
The extent of that overstatement is difficult to track. What many of our clients are interested in is whether that gap that between what Beijing is reporting and actual economic performance is widening or whether it is narrowing. And so I would argue it probably, it was widest in 2022 during the COVID lockdowns, the Shanghai lockdown and COVID-related disruptions, when most indicators of economic activity were negative. China's new property housing starts declined by 40 percent. There were double-digit declines in virtually every measure of construction activity. And yet they reported headline GDP growth of 3 percent. This was wildly inconsistent at the time. The gap probably narrowed even as China said that it recovered in 2023, 2024, and 2025
That recovery was very shallow at the time. And since the middle of 2025, we've seen a very sharp cyclical slowdown in China that I think is underappreciated in markets just how much things have weakened. And this is both structural in nature in terms of the weakness in overall credit growth and also cyclical in terms of the slowdown in, that's resulted from some of the disruptions from the war in the Persian Gulf.

**Bhagyashree Garekar** (4:32)
You know, so you've been studying the Chinese economy for more than a decade, I think.

**Logan Wright** (4:38)
More than two, yes.

**Bhagyashree Garekar** (4:39)
Right.

**Logan Wright** (4:40)
But doing this for quite some time.

**Bhagyashree Garekar** (4:42)
Right.
And you have, you know, you laid out just now a number of factors that you say are, you know, showing up within the Chinese economy. So of the kind of things you laid out, what actually seizes you right now as the most troubling aspect of the Chinese economy?

**Logan Wright** (5:00)
The most troubling aspect is that basically the leadership has chosen to allow decay rather than reform the system or try to improve it. And so the book Broken China outlines this case for how China's financial system is central to understanding its slowdown. So basically, it's been underappreciated how much China's economic growth depended upon an enormous expansion of credit. In fact, the largest single country credit expansion in at least a century, possibly much longer. China added around a third of global GDP to bank, its own bank assets in just eight years, from 2008 to 2016