The country’s growth spurt has been extraordinary in recent decades, but it is now running into self-imposed constraints. Is there more growth to come? Simon Wilson reports
What’s the issue?
There’s a growing sense that China’s economic slowdown is so serious, and so entrenched, that the nation’s rise to become the world’s biggest economy will take many years longer than predicted – and may never happen at all. Last month Bloomberg Economics forecast that China’s GDP will not overtake America’s until the mid-2040s, and even then by “only a small margin” before “falling back behind”. Before the pandemic, the analysts expected China to take and hold pole position by the early 2030s.
How fast is China growing?
Its economy grew by 3% last year, one of the lowest figures for decades, as Beijing stuck to its draconian pandemic controls and a property crisis rocked confidence. This year, following the abrupt abandonment of “zero Covid” restrictions last December, there were high hopes of a strong bounceback. In March, then Chinese premier Li Keqiang announced a target for real GDP growth of around 5% this year, and plenty of foreign analysts predicted it would go higher. Instead, China’s recovery petered out from the second quarter onwards, with exports tumbling and the real-estate slump worsening. Economists surveyed by Bloomberg have downgraded their growth forecasts for 2024 to below 5%. Over the long run, Bloomberg analysts predict China’s growth will gradually slow to 3.5% in 2030 and about 1% by 2050. That’s lower than their previous projections of 4.3% and 1.6%, respectively.
Is that all due to Covid?
It’s a factor in that China’s handling of the pandemic highlighted structural problems in its politics and economy. Sharp declines in both durable-goods consumption and private-sector investment – together with increases in savings rates – suggest that “people and companies are increasingly fearful of losing access to their assets and are prioritising short-term liquidity over investment”, says Adam Posen in Foreign Affairs. The pandemic shone a light on the Communist party’s arbitrary power over commercial activities and marked a point of no return in terms of changing people’s economic calculations. The fear of “losing one’s property or livelihood, whether temporarily or forever, without warning and without appeal”, has left China with a form of “long Covid” �
