China‘s economy is in deep distress.
China’s economy, the world’s second-largest, is now in deep distress, and its successful growth model of 40 years is “broken,” according to a prominent American financial publication, noting that warning signs extend beyond China’s dismal economic data to distant provinces.
In a major Sunday story, the Wall Street Journal reported that economists now believe China is entering a period of much slower growth, exacerbated by unfavorable demographics and a widening gap with the US and its allies, which is jeopardizing foreign investment and trade.
It speculated that this could be the end of an era rather than just a period of economic weakness.
“Now the (economic) model is broken,” the financial daily said.
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“We’re witnessing a gearshift in what has been the most dramatic trajectory in economic history,” Adam Tooze, a Columbia University history professor who specializes in economic crises, was quoted as saying by the Wall Street Journal.
According to the report, total debt, including debt held by various levels of government and state-owned enterprises, has risen to nearly 300 percent of China’s GDP by 2022, surpassing US levels and rising from less than 200 percent in 2012.
According to the Daily, senior officials in Beijing have recognized that the growth model of previous decades has reached its limits.
Chinese President Xi Jinping chastised officials for relying on borrowing for construction to expand economic activities in a blunt speech to a new generation of party leaders last year, it added.
“Some people believe that development means investing in projects and scaling up investments,” Xi said, warning: “You can’t walk the old path with new shoes.” Xi and his team so far have done little to shift away from the country’s old growth model, the financial daily wrote.
China’s GDP increased by 5.5% year on year in the first half of 2023, according to the country’s National Bureau of Statistics (NBS).
According to NBS data, China’s GDP in the first half reached 59.3 trillion yuan (approximately 8.3 trillion US dollars). According to China’s official media, the country’s GDP increased by 6.3% year on year in the second quarter.
Meanwhile, China cut its one-year loan prime rate (LPR) by 10 basis points on Monday, from 3.55 percent to 3.45 percent, while leaving the five-year rate unchanged at 4.20 percent, in an effort to boost economic growth in the world’s second-largest economy after the United States.
