China's Deflation Threatens Global Economy with "Japanification"

China's economy, once known as the world's factory, is facing a real estate slump, rising debt burden, and a youth unemployment crisis, which could lead to economic pain in the form of deflation and sluggish growth. The country's domestic issues, coupled with rising tensions between China and the West, risk exporting deflation globally and hindering China's export-led economy further. Economists are concerned about the potential ripple effects on the global economy, as China currently accounts for roughly 35% of global GDP growth. China's economic problems could lead to a new normal of slower global growth, with forecasts suggesting a shift from an average annual growth rate of 3.5% to 2.5%. However, accurate forecasting is challenging due to limited data transparency and uncertainties surrounding U.S.-China relations and decoupling.