China Is Unlikely To Become The World’s Largest Economy Anytime Soon

Business Insider published a piece this week called “China’s hopes of becoming the world’s largest economy are hitting a major roadblock“:

China’s economy is growing at its slowest pace in nearly three decades, and some economists say the worst is yet to come.

Growth potential in China is expected to slow to 5.5% from the current level of 6.5% between 2021 and 2025, according to new estimates from analysts at JPMorgan. That could fall to 4.5% by 2030, a pace that would make it difficult to surpass the US as the largest economy. 

“This means that China will remain the second largest economy much longer than expected,” the analysts said in a research note Wednesday. “The transition to slower potential growth could be volatile and requires balancing reforms to move to a more domestically driven growth model with deleveraging and public-sector restructuring.”

Officials in Beijing have sought to shore up confidence through a series of stimulus measures rolled out in recent months, including tax cuts, changes to the amount of cash banks must hold as reserves, and various incentives to boost spending.

But those programs could have little room to expand in an economy that has struggled to crack down on relatively high levels of debt in recent years. In 2018, China’s debt-to-gross-domestic-product ratio climbed above 250%.

A January New York Times piece explains how China is no longer the growth engine that it once was:

For years, no matter what was happening elsewhere, global companies bet billions upon billions of dollars that China’s consumers would keep spending money.

Now, just when the world economy could use their financial firepower, they are no longer so quick to open their wallets.

The latest sign of a slowdown in spending in China came Wednesday, when Apple unexpectedly slashed its financial forecast, citing disappointing iPhones sales in the country. The weakness followed reams of other data — declining car sales, lagging retail spending, a slumping property market, a tougher job market — that suggest Chinese consumers may be losing their once unshakable confidence.

That could have a big impact on a world looking for engines of growth, on companies that counted on China’s continuing expansion and on global investors who have long viewed China as a steady source of profits.

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Gary Anderson 10 months ago Contributor's comment

But keep this in mind. Basel 1 took down Japan. China is not so stupid as to subject itself to Basel this or Basel that.

Gary Anderson 10 months ago Contributor's comment

Make China poor and the world will be poorer. It will reach the USA. Trump is helping. Maybe the Chinese will just buy Chinese. If I were Chinese I would not buy from a nation that allows a misfit like Donald Trump to be the leader.

Jack S. Chen 10 months ago Member's comment

True, China is an unstoppable force which will only get more powerful with time.

Gary Anderson 10 months ago Contributor's comment

It makes no sense, Jack, for us not to be in on the world trade. There is no indication that China opposes free trade. We can only profit with that free trade.