Larry Summers says China's economy is hitting a wall after years of optimism.

August 22, 2023: Summers, now a professor at Harvard University, commented in a Washington Post op-ed on Monday. He argued that China’s economy faces several challenges, including a slowing growth rate, rising debt, and an aging population.

Summers said the Chinese government has been trying to address these challenges but has been “largely unsuccessful.” He warned that China’s economy could be headed for a “hard landing.”

Here are some of the key challenges facing China’s economy:

Slowing growth rate: China’s economy grew 8.1% in 2021, the slowest pace in decades.

Rising debt: China’s debt-to-GDP ratio is now over 250%, one of the highest in the world.

Aging population: China’s population is aging rapidly, which is straining the economy.

Here are some of the actions that China could take to address these challenges:

• Reform its state-owned enterprises.
• Reduce its reliance on debt-driven growth.
• Invest in infrastructure and education.
• Promote innovation.
• Summers’ warning reminds China’s economy is not immune to other major economies’ challenges. The Chinese government must take decisive action to address these challenges to avoid a hard landing.

Here are some actionable and practical takeaways from the news:

• Businesses operating in China should monitor the economic situation closely and be prepared for changes.
• Investors who are considering investing in China should carefully evaluate the risks.
• Governments worldwide should watch the Chinese economy closely and be prepared for spillover effects.