Spiraling domestic consumption is wrecking China’s economy

In June, retail sales of cars in China fell 23 percent from a year earlier. For the first half of the year, sales were down 20 percent. The China Passenger Car Association now forecasts sales for the full year will be off by 14 percent. 

The bellwether car sector is not the only area to be hit by the dropoff in consumption in the world’s second-most populous country. Smartphone sales, another important indicator, fell 13 percent year-on-year during the May 26-June 21 shopping festival. 

China’s consumers are sitting on their hands. You can’t blame them. The economy, at least as most experience it, is bad and getting worse. 

The official numbers tell a different story. Gross domestic product, reported by the National Bureau of Statistics, grew 4.4 percent in the first quarter of this year. That number was almost certainly overstated.

Yes, China’s exports are booming. The country has “islands of excellence,” tech companies and highly automated manufacturing businesses. But as British economist George Magnus notes, they “are no substitute for good macroeconomic governance and well-institutionalized technology ecosystems that diffuse benefits throughout the economy.”

Despite the success of these sectors, the economy is in distress. A report from New York-based GlobalSource Partners last December suggested the overall unemployment rate in the country then was at least 20 percent. Beijing’s official urban unemployment rate for June was 5 percent, but that’s a fantasy number.

The situation is so bad inside the country that the central government, for the first time since the........

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