China’s economic growth has fallen to its lowest level in nearly three decades. GDP growth dropped to 6.2% in the second quarter, the weakest mark since the national government began publishing quarterly figures in 1992. Though the ongoing trade war with the United States has depressed China’s growth, it is not solely to blame for the nation’s financial struggles.

U.S. tariffs on $250 billion worth of Chinese goods remain in place, primarily affecting China’s manufacturing and agricultural sectors. Some American companies are withdrawing investments and infrastructure development plans, opting for lower-cost markets in neighboring Asian countries, including Vietnam, Taiwan, South Korea, and Bangladesh.

Still, many analysts argue that trade tensions don’t represent the biggest drag on the Chinese economy. China’s economic slowdown predates the trade war by several years. Since posting record numbers in 2007, GDP growth has steadily declined as burgeoning debt and low consumer confidence increase pressures on the Chinese economy. The nation’s recent tax cuts and increased infrastructure spending might provoke temporary growth, but analysts say the country’s model of state-sponsored growth may no longer work.

China’s 2008 stimulus package burdened the nation with massive levels of debt, creating a $40 trillion mountain of government, corporate, and household debt worth more than 300% of China’s GDP as of March 2019. China’s debt accounts for more than 15% of the global total.

In a large-scale debt reduction effort, the Chinese government has significantly tightened regulations in the financial system, scaling back lending and strictly prohibiting shadow banking. These efforts have reduced national expenditures, but they have also made it more difficult for private companies to obtain financing and hurt the performance of state-run firms.

Last year, there were a record number of defaults by Chinese companies, with 50% coming out of the nation’s manufacturing sector.

Chinese consumers, concerned that the economy’s volatility could negatively impact their investments and personal debt, have been wary to spend in recent months. Elevated property prices have also strained consumers’ purchasing power.

Retail sale growth was down, and tech companies’ share prices tumbled. Ford sold 22% fewer vehicles in China during the second quarter than in the same period a year ago; General Motors posted a 12% drop in vehicle sales, too.

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