When much of the world went through a major recession in 2008-2009, China, through enormous government spending efforts, managed to weather the storm and buoy the global economy.
With the world tottering “perilously close” to a global recession on the back of Russia’s war in Ukraine and three years of the COVID-19 pandemic, a repeat of a Chinese-led recovery seems less likely.
The country’s economy expanded by only 3 percent in 2022. Growth is projected to remain slow in the early quarters of 2023 before rebounding strongly in the second half of the year, according to a survey of 37 economists conducted by Nikkei in December. The average GDP growth figure put forth by the group was 4.7 percent, with the vast majority of predictions falling between 4.0 and 5.9 percent.
Yet even the most optimistic recovery scenario for China does not portend a return to the soaring growth rates that the country was used to for decades. China’s GDP has grown at an average of nearly10 percent annually since Beijing embarked on economic reforms in 1978.
The world’s second-largest economy has had a tumultuous ride since the pandemic first began. After early optimism about its rebound in 2020, repeat crackdowns on the private sector and strict zero-COVID lockdowns have wreaked mayhem on supply chains and damaged investor confidence. And January brought more bad news: The country’s population declined last year for the first time in 60 years, raising worrying questions about its future workforce.
Now, with President Xi Jinping effectively established as China’s leader for life and the country finally transitioning out of zero-COVID, can the country ever hope to return to sustained high growth?
The short answer: No. China’s double-digit growth era is almost certainly over, economists and analysts told Al Jazeera. The growth rate that China does manage to sustain in years ahead will largely depend on how Beijing adapts to the structural challenges facing its economy and the impact of Xi’s new priorities.
Rapid rise, silent fall
China’s years of high GDP growth meant that its economy ballooned more than tenfold between the turn of the century and 2021, from $1.2 trillion to nearly $18 trillion, according to World Bank data. By contrast, the GDP of the United States, the world’s largest economy, is a little more than double its size in 2000.
Over the coming years, however, China’s growth rate will slow down to between 2 and 5 percent, according to estimates by economists Al Jazeera spoke with.
And even that masks a shift that has already been under way, said economist Michael Pettis, a Beijing-based senior fellow at the Carnegie Endowment for International Peace. Focusing on GDP numbers risks missing the forest for the trees – such figures only give an incomplete, time-delayed picture of the Chinese economy. “The high-growth era seems to be ending now as per the numbers, but actually, in terms of productive investment, it ended around 10 to 15 years ago,” he told Al Jazeera.
Pettis said GDP – used initially to measure Western economies – is not built-for-purpose for capturing anomalies caused by China’s “soft budget constraints”, which refers to a model where the state steps in to cover for spending in excess of income earned from a project. For instance, a sewage system built in the Gobi Desert and one in Beijing might add the same value to China’s GDP, despite the former having little economic value.
“[In China], you can continue losing money for a very long time if it’s politically necessary… but it’s not reflective of the underlying productive capacity of the economy,” he said.
Most economists appear convinced that China’s previous growth model has run its course. But with the country’s economy in the midst of a major transition, the future is unclear.
The unique demographic and economic conditions China leveraged to achieve unprecedented growth in recent decades have faded away.
The vast labour pools that fuelled China’s low-cost industrial base are shrinking as its population ages rapidly. The country’s population decline in 2022 followed years of slowing birth rates.
China will be replaced by India this year as the most populous country in the world amid an accelerating shift by multinationals to move more manufacturing to other parts of Asia, such as Vietnam, Malaysia, India and Bangladesh.
The debt-heavy investments in real estate and infrastructure that have historically driven China’s growth have peaked too. Hung Tran, a senior fellow at the Atlantic Council, said these investments have yielded diminishing returns.
China’s total factor productivity – a measure of how much output an economy actually churns out as a fraction of inputs – is no longer growing as it used to. Before 2008, productivity growth averaged 2.8 percent but has slowed to just 0.7 percent a year since then.
This has left many overleveraged corporations and local governments near breaking point, as evidenced by the implosion of the country’s largest property developer, Evergrande, in 2021.
To be sure, China’s leaders could pull some levers to ease the pain of transition. They could raise the official retirement age for men (60) and women (55) to 65, “increasing the labour participation rate of the economy – a measure successfully employed by Japan”, said Hung. But even that might only partly delay the crisis: Already, the share of China’s population in the 15 to 64 age group is shrinking, after peaking at just under 1 billion in 2015.
Abolishing the hukou system – which ties social benefits to household registration – could increase urbanisation levels, sustaining China’s labour force, Hung said. The system at the moment often leaves migrant workers in cities without state benefits like public schooling, serving as a deterrent to further urbanisation.
Automating more manufacturing by building upon China’s advanced digital infrastructure could also help maintain industrial productivity.
Yet even as Beijing seeks to soften an otherwise turbulent descent into lower-growth altitude, its political leadership is setting new priorities in place for China’s journey.
What Xi wants: Looking within
Xi has shifted Beijing’s policy focus away from a “growth at all costs” mantra pursued by previous post-reform leaders. Instead, he has emphasised “high-quality growth”, which features as a guiding principle in China’s current five-year plan. It is part of Xi’s “new development concept” that prioritises resilience to outside pressure and more equal distribution of China’s wealth.
In essence, the idea is to lessen China’s reliance on export-driven growth by building an economy fuelled by domestic consumption, said experts. A robust internal market can act as a buffer against shocks from a volatile global trading system and Western sanctions. China’s new strategy also aims to reduce China’s carbon footprint while pursuing cutting-edge technologies, like advanced semiconductors and quantum computing. Developing these technologies at home has become even more important for the country amid a wave of tough export control restrictions imposed by the US aimed at crippling China’s chips industry.
But can “high-quality growth” deliver runaway growth rates like before? “In theory, it can, but it hasn’t happened before in history,” said Pettis. “Consumption is the key here.”
Household expenditure as a share of total GDP sat at about 38 percent by the end of 2021, far below the global average of 63 percent, leaving China with one of the weakest consumption levels among the world’s major economies.
“Unless you can get that surge in [household] consumption, GDP is going to be around 2-3 percent at best,” he said.
What slow growth means for China – and the world
The slowing of the Chinese growth engine will impact everyone, though not in the same way.
Many countries, especially those who have come to rely on China as their major export destination, will feel the drop in demand acutely. The speed at which countries can pivot to other faster-growing emerging markets, such as in India and Southeast Asia, will largely determine the winners and the losers during this transition.
The slowdown will also influence the geopolitical power balance. If China peaks economically in the coming decade, its dream of surpassing the US as the world’s biggest power will appear less inevitable. Such a scenario could prod Beijing into taking bolder actions on what it perceives as its “core interests” – such as Taiwan’s status – while at the zenith of its power, experts have warned.
Economists predict turmoil within China too.
Xi has adopted the Mao-era catchphrase of “common prosperity” as a guiding economic principle, turning Beijing’s focus towards addressing inequalities, from housing to healthcare and education. While details on the implementation are scarce, common prosperity has also become the rhetoric of heavy-handed market intervention. China’s tech CEOs, for instance, pledged billions to the cause shortly after a crackdown that erased over a trillion dollars in combined market value from their firms.
“Common prosperity is not really about redistribution in the sense it is understood in the Western welfare models,” said Alicia García-Herrero, Hong Kong-based chief economist for Asia Pacific at investment bank Natixis. After all, China is not increasing its corporate tax rate, which ranges from 15 to 25 percent.
Instead, the Chinese Communist Party (CCP) will target excessive accumulation of wealth for redistribution, but to “whom and how, will be decided ad hoc”, she said.
Still, this shift in Beijing’s focus towards “dividing the pie” is in itself an acknowledgement of China’s new reality. For decades, maintaining high economic growth has been central to the legitimacy of the ruling CCP. Yet, in this new lower-growth era, the nominally communist government may require new narratives to maintain legitimacy in the eyes of the Chinese people.
“Promoting common prosperity is necessary to deal with growing inequality and wealth distribution which could lead to social discontent and unrest,” Hung said.
If China gets it right, it could end up with “slower but hopefully more equitable and sustainable growth”, he said. And a new social contract between the party and the country’s 1.4 billion people.
The short answer: No.China's double-digit growth era is almost certainly over, economists and analysts told Al Jazeera
Al Jazeera
Al Jazeera (Arabic: الجزيرة, romanized: al-jazīrah, IPA: [æl (d)ʒæˈziːrɐ], "The Island") is a state-owned Arabic-language international news network of Qatar.
. The growth rate that China does manage to sustain in years ahead will largely depend on how Beijing adapts to the structural challenges facing its economy and the impact of Xi's new priorities.
In 2022, China's economy grew at its slowest rate since the 1970s. Long-term projections of potential economic growth rest on three factors: demographics, capital investment, and productivity.
GDP Annual Growth Rate in China averaged 8.97 percent from 1989 until 2023, reaching an all time high of 18.70 percent in the first quarter of 2021 and a record low of -6.90 percent in the first quarter of 2020.
In its World Economic Outlook released last week, the International Monetary Fund said China is “rebounding strongly” following the reopening of its economy. The country's GDP will grow 5.2% this year and 5.1% in 2024, it predicted.
But once China begins to take seriously the need to rebalance its economy, China's annual GDP growth is unlikely to exceed 2–3 percent for many years, unless there is a substantial increase in the growth rate of consumption.
Following China's swift reopening after the COVID-19 outbreaks in late 2022, GDP growth is expected to rebound to 5.1 percent in 2023, from 3 percent in 2022. Growth will be led by a recovery in demand, particularly for services.
The unique demographic and economic conditions China leveraged to achieve unprecedented growth in recent decades have faded away. The vast labour pools that fuelled China's low-cost industrial base are shrinking as its population ages rapidly.
Economists generally attribute much of China's rapid economic growth to two main factors: large-scale capital investment (financed by large domestic savings and foreign investment) and rapid productivity growth. These two factors appear to have gone together hand in hand.
As the world's third largest and fastest growing major economy, China presents enormous opportunities for U.S. workers and firms but also considerable challenges.
China's economy has grown to one of the largest and most powerful in the world over the past few decades. Driven by industrial production and manufacturing exports, China's GDP is actually now the largest in terms of purchasing power parity (PPP) equivalence.
Rajah last year projected that while China would become the world's biggest economy by 2030, “its size advantage over America would be slim and it would remain far less prosperous and productive per person than the United States and other rich countries, even by mid-century.” The Japan Center for Economic Research, ...
Still, China's economic headwinds could lead to major impacts. Any slowdown in the Chinese economy will create new price pressures in the U.S. if its export prices rise — and hurt the demand for U.S. products.
India. India's GDP grew by 8.7% in 2021, reaching $3.1 trillion, making it the fastest-growing major economy in the world. Furthermore, India's per capita income has doubled in the last decade, and poverty rates have declined significantly.
The 3% growth last year was China's lowest in more than 40 years. In 2023, the Chinese economy will rebound from that historical low, barring any extraordinary downside risks.
GDP grew faster than expected in the first quarter of 2023 with consumption the main growth engine. China's GDP increased 4.5%YoY in 1Q23, which was better than our forecast of 3.8%YoY, and stronger than the previous quarter's 2.9%YoY.
The country's National Bureau of Statistics reported a drop of roughly 850,000 people for a population of 1.41175 billion in 2022, marking the first decline since 1961, the last year of China's Great Famine.
China's population decline can be traced back to the restrictive family-planning policies launched in the 1970s and an impressive economic boom fueled by China's huge labor force. China's modernization brought rapid urbanization, rising income levels, and better education to large parts of the country.
Economic growth hit 5.9% in 2021 - the fastest rate in nearly four decades - as pandemic reopenings fuelled consumer spending and job growth. Companies also had it good, enjoying unusually strong profits, despite facing higher costs for supplies.
China has been the fastest growing economy in the world since the 1980s, with an average annual growth rate of 10% from 1978 to 2005, based on government statistics.
The age of “peak China”, as they call it, is upon us—and it is far less Olympian a summit than most had predicted. In 2011 Goldman Sachs projected that China's GDP would surpass America's in 2026 and become over 50% larger by mid-century.
For example, in the Western theory, China and India belong respectively to the second and third worlds, but in Mao's theory both China and India are part of the Third World which he defined as consisting of exploited nations.
The growing debt has cast a shadow over the country's economic potential for the foreseeable future. Moreover, the transition toward a consumption-driven growth model has yet to yield significant results.
It is one of the world's fastest growing countries and is the tenth largest exporter. China is also a significant recipient of foreign aid and a major borrower on international capital markets.
With an GNI per capita of $10,610 in 2020, China is an upper middle-income country. The poverty line for an upper middle-income country is $5.5 per day at PPP. As of 2020, China has succeeded in eradicating absolute poverty, but not the poverty defined for upper middle-income countries which China belongs to.
As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).
Due to the lower fertility rate and extension of the human life span, the population in China is aging faster than almost all other countries. In 2050, the proportion of Chinese over retirement age will become 39 percent of the total population.
In other words, on a proportional basis, China is now roughly 75 percent as advanced in innovation and advanced-industry production as the United States. If this relative growth continues apace, China will surpass the United States by 2035.
This might be surprising since China is currently the second largest economy in the world and is poised to overtake the size of the US economy by 2050.
Many Americans continue to view China as a threat to the United States, both militarily and economically: 65% say China is at least a somewhat serious economic threat to the U.S. and 57% say it is at least a somewhat serious military threat.
"China will be unable to surpass the U.S. economically, even after 2036," JCER said, due to slower productivity gains coupled with labor shortages. The Communist Party of China has set two long-term targets for 2035 and the middle of this century in amendments to the constitution made in October.
Answer and Explanation: It is unlikely that China's economy will collapse if U.S. stops buying Chinese goods. Trade is an important part of any economy, and a very important part of China's economy. According to the World Bank, exports account for 20% of China's gross domestic product.
China has shifted purchases away from the United States to reduce its reliance on US suppliers, but US farmers remain highly dependent on the Chinese market. In 2022, around 19 percent of US agriculture exports went to China, up from 14 percent in 2017 and 13 percent in 2009.
Banks would close. Demand would outstrip supply of food, gas, and other necessities. If the collapse affected local governments and utilities, then water and electricity might no longer be available. A U.S. economic collapse would create global panic.
China's economic growth is in long-term decline after hitting a peak of 14.2% in 2007, hampered by hurdles including an aging, shrinking workforce and growing curbs on Chinese access to Western technology due to security concerns.
China's economy is set to rebound this year as mobility and activity pick up after the lifting of pandemic restrictions, providing a boost to the global economy.
The United Kingdom's Gross Domestic Product in 2050 is estimated to be 3.58 trillion US dollars, with a per capita income of 49,412 US dollars. The present gap between the British economic wealth and Germany's economic wealth will contract significantly.
Emerging markets (E7) could grow around twice as fast as advanced economies (G7) on average. As a result, six of the seven largest economies in the world are projected to be emerging economies in 2050 led by China (1st), India (2nd) and Indonesia (4th)
With the trend expected to continue, the U.N.estimates China's population will fall from 1.41 billion to about 1.31 billion by 2050 and keep shrinking from there.
In 2050, the proportion of Chinese over retirement age will become 39 percent of the total population according to projections. China is rapidly aging at an earlier stage of its development than other countries. Current demographic trends could hinder economic growth and create challenging social issues in China.
This might be surprising since China is currently the second largest economy in the world and is poised to overtake the size of the US economy by 2050.
Therefore, China's GDP growth rate of 3 percent was higher than the US' 2.1 percent last year, but the increment of the US' GDP slightly surpassed China's. This is worth paying attention to. Last year, the US boasted that its GDP growth rate might surpass China's for the first time since 1976.
China's population decline has been further exacerbated by several other factors, including high living costs, shifting attitudes among the younger generation towards family and marriage, and the economic slowdown caused by the COVID-19 pandemic and the country's stringent measures to contain it.
In the business-as-usual case, it foresees existing policies being enough to limit global population growth to below 9 billion in 2046 and then decline to 7.3 billion in 2100.
When did the one-child policy end? The end of China's one-child policy was announced in late 2015, and it formally ended in 2016. Beginning in 2016, the Chinese government allowed all families to have two children, and in 2021 all married couples were permitted to have as many as three children.
China is not only the country with the largest population on earth, it is also one of the countries with the fastest aging population. This is mainly due to decades of falling birth rates on the one hand and steeply rising life expectancy on the other.
According to data released by the National Health Commission of China, life expectancy at birth increased from 77·9 years in 2020 to 78·2 years in 2021.
The U.S. currently has the largest economy in the world by far with $23 trillion in 2021 GDP, according to the World Bank's data, while China has the second-largest GDP at $18 trillion and India the sixth-largest at $3 trillion.
The U.S. makes up 23.93% of the total global economy, says Investopedia. The World Bank Group lists China as the second richest country in the world as of 2021, possessing a GDP of $17.734 trillion along with a GDP per capita of $12,556.3. China makes up 18.45% of the total global economy.
Introduction: My name is Nathanael Baumbach, I am a fantastic, nice, victorious, brave, healthy, cute, glorious person who loves writing and wants to share my knowledge and understanding with you.
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