2023-07-18 22:18 United Daily News reporter Lin Chenyi / real-time report
According to a Reuters analysis, China is entering an era of sharply slowing economic growth, which brings a daunting prospect: it may never get rich. Desmond Lachman, a senior researcher at the American Enterprise Institute, a think tank in Washington DC, asserted that the economy in the next 10 or 20 years will not surpass that of the United States, and China’s economic growth will drop to 3%. He added that when the youth unemployment rate has broken through 20%, China feels like it has entered an economic recession.
The report pointed out that when Japan’s economy began to stagnate in the 1990s, its per capita GDP had surpassed the average of high-income economies and approached the level of the United States. Yet China is currently only slightly above middle-income levels. China’s GDP grew at an annual rate of 6.3% in the second quarter, and economists believe it will grow by about 5% in 2023 before slowing down.
In the past 10 years, China’s GDP has grown by an average of 7% per year, exceeding 10% in the 2000s. Such a loss of momentum has led economists to no longer attribute weak household consumption and private investment to the impact of the epidemic, but to structural problems. These include the bursting of a housing sector that accounts for a quarter of output; one of the worst imbalances between investment and consumption; mountains of local government debt; and the Communist Party’s tight grip on society, including private business.
Wang Jun, chief economist of Huatai Assets, pointed out that “demographic issues, a hard landing in real estate, heavy local government debt, pessimism in the private sector, and US-China tensions make us not optimistic about medium- and long-term growth.”
Chinese policymakers say they want household consumption to drive growth. Juan Orts, a China economist at Fathom Consulting, believes that boosting consumer demand requires diverting resources away from manufacturing exporters, which can partly explain why Chinese authorities Hesitant to adopt relevant reforms. “We don’t think China is going to commit to that route,” which is the solution to the economic downturn, he said.
In fact China runs in the opposite direction. Chinese President Xi Jinping opposes the “common prosperity” policy of unfair distribution, and encourages other sectors such as finance to cut wages. Deteriorating urban finances also prompt civil servants to cut wages, which in turn leads to a deflationary spiral.
The 40-year-old bank manager, surnamed Zhao, said she felt she would never be rich. Although she was promoted several times, her salary remained the same. “I have missed the golden age of Bank of China,” she said.
Many economists have called for better public health care, higher pensions and unemployment benefits, and other components of the social safety net to give consumers the confidence to save less.
Cai Fang, an adviser to China’s central bank, called this month to stimulate consumption, including changes to residence permits or hukou, which deny public services to cities where millions of migrant workers work.
Zhu Ning, deputy dean of the Shanghai Advanced Institute of Finance, said improving social welfare could make the growth rate of 3% to 4% more sustainable.
Reuters believes that China may never get rich as it enters an era of slowing growth to 3%.Xinhua News Agency
Koo Chao-ming, chief economist at Nomura Research Institute, believes that China is already facing a “balance sheet recession” in which consumers and companies rush to repay their debts instead of borrowing and investing. This is the beginning of a recession, he said, and the only solution is “rapid, large and sustained” fiscal stimulus, accompanied by reforms to lift the private sector out of the state’s shadow, for example by improving relations with countries where foreign capital comes from.
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2023-07-18 14:18:16
