A new economic era begins in China: it may never become a rich country

China is entering an era of much slower economic growthwhich raises a chilling possibility: I may never be rich.

Whether the world’s second-largest economy is advancing at a rate of 3-4% annually or flirting, as some economists predict, with “Lost decades“L Stagnation similar to that in JapanIt seems that it will disappoint its leaders, its youth, and much of the world.

Policymakers hope to narrow the development gap China to me United State. Chinese youth went to universities to study for jobs in the developed economy. Africa And latin america Count on that China Buy your raw materials.

“The Chinese economy is unlikely to overtake the US economy in the next decade or two“, claimed Desmond LachmanPrincipal Investigator American Enterprise Institute. He expects growth to slow to 3%, which is what “It will feel like a recession“When youth unemployment already exceeds 20%. It is not good for the rest of the global economy either,” he added.

when Japan began to stagnate in the nineties, It has already surpassed the average per capita GDP of high-income economies And it was approaching levels United State. Chinabut, Barely above average rent.

Growth of 6.3% in the second quarter was disappointingtaking into account the low base caused by Siege COVID-19 In the past year, the pressure has increased on Chinese leaders, who are expected to meet this month to discuss short-term momentum and long-term solutions. Data for April and June Growth in 2023 about 5%with slower rates after that.

However, the average annual growth China It has been around 7% in the past decade, and more than 10% in the 2000s.

before that loss of momentumEconomists no longer attribute weak household consumption and private sector investment to the effects of the pandemic, but to structural ills.

Among those Bubble burst in the real estate sectorwhich account for a quarter of production; One of the deepest imbalances between investment and consumption. a debt mountain local governments; and the Tight control of the Communist Party on society, including private companies.

next to, China’s workforce and consumer base are shrinkingWhile the group of retirees is increasing.

“The demographic problem, the hard landing of the real estate sector, the heavy debt burdens of local governments, the pessimism of the private sector and the tensions between China and the United States do not allow us to maintain an optimistic view of growth in the average. And in the long term.he announced Wang JunChief economist at Huatai Asset Management.

the National Development and Reform Commission of China (NDRC) did not respond to questions from Reuters On growth prospects, structural shortcomings and reform plans.

Exit ways

In an article published July 4 in the Official Journal:Kiyoshi“, Cheng ShanjiChairman of the National Human Rights Commission, a rare reference to the middle-income trap, pointing out China needed to “accelerate the construction of a modern industrial system” to avoid this.

Cheng He was referring to the struggle of developing countries to move from middle to high income level due to rising costs and loss of competitiveness.

Economists cite prosperity in electric cars in China as a sign of progress, but much of its industrial complex is not being modernized at the same rate. Overseas car sales account for only 1.7% of exports.

“Many observers will look at some companies and say, wow, China can invent all these wonderful products, so the future must be bright. My question is: do we have enough of those companies?“, He said Richard CoChief economist at Nomura Research Institute.

Policymakers said they wanted household consumption to drive growth, without hinting at concrete action.

John Ortsan economist specializing in China to Fathom Consulting, he said that increased consumer demand could divert resources from supporting manufactured exporters, which partly explains the reluctance to undertake this type of reform. “We do not believe that the authorities will commit to following this path“, He said OrtsDescribing it as a “way out” from the economic recession.

instead of, China Steps have been taken to the contrary.

Shared Prosperity Campaign Xi Jinping Against inequality he encouraged lower wages in finance and other sectors. Deteriorating municipal finances cut civil servant salaries, creating a deflationary spiral.

ChowA bank manager Beijing, She thinks she will never get rich, because her salary hasn’t changed after several promotions. instead of working hard, He plans to retire at the age of 40 In a smaller and cheaper city.

“I missed the golden age of banking“, He said Chow On condition of partial anonymity, as she is not authorized to speak to the media.

Many economists called for a Better public health, higher pensions and unemployment benefits and other elements of the social safety net that give consumers the confidence to save less.

Cai FangCentral Bank Adviser, called this month to encourage consumptionincluding changes to Chinese residence permits, or hokuwho deprive millions of rural migrants in the cities where they work from public services.

Chu NingDeputy Dean Shanghai Higher Institute of Financestated that improvements in welfare could make growth rates of 3-4% more sustainable.

last chance

co He mentioned that problems China more urgent than those in Japan a generation ago, giving policymakers room for error to take advantage of the “last chanceTo reach the standards of living in the developed world.

in your opinion, China Suffers from “Balance sheet stagnationWhere consumers and businesses repay debt rather than borrow and invest.

Thus begins the depressionAnd the only remedy is “quick, large, and sustained” fiscal stimulus, which he doesn’t think will happen, given debt problems. China.

Beyond that, he said The incentive must be productive It is complemented by changes that allow the private sector to emerge from the shadow of the state, even by improving relations with the countries of origin of foreign investment.

but China I’ll have to reverse course.

In the last years, Infrastructure investment has generated more debt than growth.

As major economies try to reduce their dependence on ChinaAnd Beijing Still embroiled in tit-for-tat trade battles, it is the latest on metals used in semiconductors.

“Every time the United States announces an anti-China policy, the Chinese government introduces a similar policy. But Americans are not in the middle-income trap. China yesit states co. “If the Chinese don’t achieve their Chinese dreams, you could have 1.4 billion unhappy people there, which could be destabilizing.“.

(c) Reuters. –

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