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The recession in China has begun. Normally a recession would be marked by two quarters of GDP contraction. The Chinese economy needs a momentum of much more than that to retain growth of its middle class, essential to internal consumption, and the progress of its state-owned companies, which substantially control the economy. China has attempted to reverse its slide with monetary and bank policy. That has not worked. The government expects GDP expansion of about 8% this year. That will not happen.

The HSBC flash PMI showed 48.1 for last month. Hiring dropped to a two-year low. The lead economist of HSBC put the news in context. Qu Hongbin said, “With new export orders sluggish and domestic demand still softening, China’s slow down has yet to finish. This calls for further easing to come from Beijing.”

Easing may not help, though. China’s mighty export machine has been hampered by low demand, particularly because of the economic crisis in Europe. The European Union is the largest economy in the world, based on gross domestic product. Japan’s economy is also troubled. While the U.S. has started a recovery, it is tentative. As long as unemployment stays above 8% and home prices continue to fall, the recovery is incomplete.

China is faced with two countervailing forces. The first is a rapid rise in the demands of workers in many factories to be paid better. On the other side, these factories have lost business and are hardly in a position to accept the salary demands without risking losses. Improved wages and growth of the middle class were supposed to drive consumer spending in China — a way to wean its economy from its heavy reliance on exports.

The middle class is faced with another economic pressure. Residential real estate prices have begun to fall. People who have put money into homes and apartments will be challenged as the value of those assets drop. That, in turn, will further undermine consumer spending.

China is caught in yet one more dangerous trap. Just as its economy struggles with slack demand, the cost of energy has spiked higher, mostly because of an increase in oil prices. At some point it will have to pass these costs along to consumers and businesses. It already has begun to raise the upper limit of what oil firms can charge for gas and diesel.

China, absent export expansion, cannot continue to increase the size of its huge middle class. That middle class is supposed to be one of the foundations of its economic future.

Douglas A. McIntyre