Chinese economist Li Daokui said China’s biggest macroeconomic problem is not a “K-shaped” divergence between strong and weak sectors, but an overall cooling that has persisted for three years. Speaking at the 122nd China Macroeconomy Forum on July 11, the Tsinghua University institute director warned that focusing only on divergence gives false comfort, since the “upper line” of a K-shape cannot lift the whole economy.
Li highlighted two concerning indicators. First, his team recalculated a broader unemployment rate by including discouraged workers who had stopped being counted as part of the labor force, arriving at a rate of 10.2%. He estimated about 24 million people have been long-term discouraged jobseekers, including 13 million aged 16 to 24, posing risks to social stability.
Second, fixed-asset investment turned negative in 2025 and fell a further 4.1% year-on-year in the first five months of 2026, an unusually severe and prolonged decline.
Li attributed the slowdown to the disappearance of old growth engines—large-scale infrastructure and real estate investment—without new ones emerging. While households have absorbed much of the property downturn’s impact, he said the bigger problem lies with local governments and their debt. Households are reluctant to borrow for consumption, businesses are reluctant to invest, and funds flowing to local governments are largely being used to roll over old debt rather than fund new activity.
Li proposed that the central government significantly increase bond issuance beyond this year’s planned roughly 12 trillion yuan (approximately US$1.68 trillion), directing new funds toward stabilizing real estate, human capital investment, livelihood spending, and regional consumption subsidies to help local governments drive economic transformation.
Source: Central News Agency (Taiwan), July 14, 2026
https://www.cna.com.tw/news/acn/202607140130.aspx