China's economic downturn is more shocking than outsiders realize, says former Chinese property mogul

• China's economic conditions are worse than thought, Desmond Shum told The New York Times.
• Even basic products won't sell, as consumer prices near deflation.
• This will result in tighter control of the firms by Beijing, as it become less secure. 

Conditions in the Chinese economy are worse than the world thinks, a self-exiled property entrepreneur told The New York Times. 

According to Desmond Shum — once at the head of a multibillion-dollar development firm that he left in 2015 upon tighter control by Beijing — sales across industries, even those thought to be insulated from any slowdown, are falling, and the economic outlook among Chinese consumers is so dire that executives are reporting blatant acts of theft by employees. 

"Several things have shocked me in conversations I've had with businesspeople in China," he said. "A big dairy company is producing more milk powder because people are cutting back on buying milk. Normally this is one of the last things you would cut out."

Shum's description of conditions on the ground in China provide an inside look at stagnating growth, as the country's post-pandemic recovery has fizzled dramatically since the first quarter. 

Recent data shows that the Chinese producer price index dropped by the fastest rate in seven years last month, while consumer prices now linger at the edge of deflation for the first time since 2021.

The sputtering economy has also become evident in growing joblessness among the country's youth, where over 20% of 16-24 year olds were unemployed in May. Meanwhile, debt burdens continue to weigh on the property market, further straining new economic growth. 

These factors have already caused Beijing to acro, with the People's Bank of China implementing interest rate cuts to reignite economic activity. 

But in Shum's view, conditions are also making the country's top brass insecure, resulting in tighter control of the nation's business landscape, especially among foreign firms. For instance, companies with Western ties are vulnerable to raids, while foreign entities are faced with new data restrictions.

This is contributing to a significant withdrawal of international firms from China, he said, which has the potential to shift the current trade regime away from the country.

"People talk about 'deglobalization,' but the proper term is 'reglobalization minus China,'" Shum said. "You won't have one country replacing China, but operations are spreading to Vietnam, Indonesia, Sri Lanka, India and elsewhere."