According to a think tank based in Sydney, China has no “meaningful initiative” over the United States and will remain productive “much less prosperous” per capita by the middle of the century. Let’s go.
In that new analytical paper, “Fix the rise of ChinaAccording to forecasts, the Lowy Institute believes that China’s economic growth will slow by an average of 2-3% overall from now to 2050.
Roland Rajah, co-author of the report and lead economist at Lowy, said China faces some significant economic constraints, including vital challenges, lower housing and public investment, and lower productivity. Said.
Rajah said in 20 recent studies suggest that China’s economic growth averages about 5% annually by 2030 and could then decline to about 4% by 2050. rice field.
“Expectations for the rise of China should be revised down significantly compared to most existing economic studies, especially those who appreciate the broader implications of China’s rise for world politics,” he said. rice field.
Since no actual data is available from China, the analysis is based on the latest medium-term forecasts from the IMF and long-term forecasts released by the OECD in 2018.
Economists are often skeptical of official data released by the Chinese Communist Party. For example, some experts find GDP numbers to be overestimated and therefore unreliable (pdf).
Demographics
The most direct factor in China’s long-term decline in economic growth is its demographics.
After 37 years of the communist government’s strict one-child policy, China’s working-age population continues to decline dramatically.
In the last decade, the fertility rate has dropped to 1.3 per woman in 2020, well below the fertility rate, according to China’s latest census.
“”[United Nations projections] By 2050, we suggest that China’s working-age population will decline by about 220 million, about one-fifth of its current level, “Rajah said.
Moreover, China has limited ability to offset this vital outlook. Developed countries in the West usually use immigrants to compensate for their low fertility rates, but China is not a popular option for immigrants.
In fact, China’s net immigrants are negative, with more indigenous peoples wanting to move abroad than those entering the country.
Housing market
As the population ages and declines, so does the need for housing. As a result, the Chinese housing market is also facing decline.
“Chinese housing market [is] After decades of rapid growth and investment, we have already experienced difficult regulatory-led financial turmoil, “Raja said.
Over the last few decades, China’s housing market has been booming, with housing investment estimated to surge to 14% of GDP, or half of all private capital investment.
“Concerns about oversupply, over-leverage, speculative investment, and sharp price increases have been around for many years,” Raja said. “As a result, Chinese policymakers have recently begun to more firmly restrain the housing market.”
The recent collapse of China’s Evergrande Group, which had a debt equivalent to 3% of China’s GDP, was the first “significant victim” of Beijing’s stricter housing policy.
Rajah said many other real estate developers appear to be “financially vulnerable,” but market conditions can be more difficult.
One of the basic problems is the slowdown in urban population growth. This means a “dramatic decline” in urban housing construction.
Another factor is that about 90% of registered urban households are reported to own at least one property. Weakening economic growth will also reduce employment opportunities and reduce incentives for rural to urban migration.
This declining demand combined with the long-standing problem of oversupply makes the outlook for this sector even more negative.
Productivity
As China faces a dramatic decline in the working-age population, attention has shifted to improving productivity, and it is estimated that productivity continues to decline.
“But the key question is, what is the pace of productivity performance that China can realistically achieve,” Raja said.
Historically, China has never had impressive productivity. “Strong productivity” performance reflects a “very low starting point,” Rajah said.
Comparing the Chinese economy with similar stages of development of the Four Asian Tigers economy, China’s productivity growth to date has fallen below a “significant margin.”
“Previous East Asian miraculous economies have virtually benefited from relatively free access to western markets and technology, but geopolitics says that China can no longer do so, instead. It means that we are facing the prospect of strengthening the “separation” from the United States and potentially other advanced Western economies. “Raja said.
Economic dependence on China
China has been Australia’s largest trading partner since overtaking Japan in 2007 and has relied on a planned economy for the past two decades.
Continued reliance on the declining Chinese economy may not be sustainable for the future growth of Australian business.
The politically motivated trade war of the Communist government, which began in mid-2020, has encouraged companies to diversify elsewhere.
Lithuanian Foreign Minister Gabrielius Landsbergis recently told Australians that breaking dependence from Beijing and Moscow would increase the cost of commodities, a price the world would have to pay to maintain a rule-based order. Told.
“For decades, there were people who were convinced that it was possible to bring values like the rule of law and democracy to others through trade liberalization,” Landsbergis said on February 10th. I told the press club. Seems like a fact — it’s actually the exact opposite. “
“Profitability seems to have created dependencies. Dependencies also limit the possibility of one taking responsibility for the other,” he said.
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Rebecca Zhu is based in Sydney. She focuses on Australia’s economy, property and education. Do you have a hint? Contact her at [email protected]