This year, China’s economic growth rate is increasingly unlikely to meet the government’s target of around 5%. This raises serious concerns about China’s long-term ambition to overtake the United States as the world’s largest economy by 2035.
Experts agree that characterizing China’s economic outlook as bleak is no exaggeration, especially given the mounting evidence of deteriorating conditions. Recent reports from various media outlets, including Sichuan Economic Daily, paint a sobering picture. While the economy grew by 5.3% in the first quarter year over year, growth slowed to 4.7% and 4.6% in subsequent quarters. The fourth quarter could decline, with growth expected to dip below 5%. Achieving the targeted 5% growth for the year now seems like a pipe dream.
Next year’s outlook is equally grim despite the government’s aim to maintain a growth rate of around 5%. Global investment banks project growth to hover around 4.5%. The Bank of Korea Beijing Representative Office paints an even bleaker picture, forecasting growth in the low 4% range.
Multiple factors contribute to this downturn, including the prolonged slump in the real estate market. Several years ago, China’s property sector accounted for about a quarter of its GDP. It is in freefall today, reflected in Evergrande’s $330 billion debt. Once China’s largest property developer, Evergrande is on the brink of bankruptcy.
The ongoing contraction in the domestic market only deepens the crisis. The term “qi Huang,” meaning “cash crunch,” has become synonymous with the country’s economic malaise. Beijing restaurateur Liang Wuze’s account is revealing: “It’s shocking. I run two large restaurants but often cannot even hit 10,000 yuan in daily sales. At this rate, bankruptcy is inevitable.” His concerns are far from isolated.
Looking ahead, the potential return of a “Trump 2.0” administration in the U.S., set to begin on January 20, introduces another layer of uncertainty. For China’s already fragile economy, this could be the tipping point. Pessimistic economists within the country are increasingly vocal in declaring that the era of rapid economic growth is over. Their increasingly dire forecasts seem to be proving all too accurate.
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