F-22Raptor
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By the middle of 2022, China’s top leadership had stopped mentioning their target for GDP growth. It was already clear that they’d fall short of the 5.5 per cent figure set at the beginning of that year, with the Politburo instead saying that they strove for “the best possible results”. In the end, a series of fierce nationwide lockdowns combined with the global impact of the Russian invasion meant that the economy grew by a measly 3 per cent in the year. The bottom had fallen out of China’s miraculous growth machine.
So when newly released figures from this week showed that the Chinese economy grew by 4.5 per cent in the first quarter of 2023, Beijing and its usual defenders were jubilant. March retail sales were up 10.6 per cent compared to the previous March, while exports were up nearly 15 per cent. New home prices rose at the fastest pace in 21 months. After the annus horribilis of 2022, China is on track to hit its GDP growth target in 2023 (5 per cent). The Q1 rebound has exceeded expectations. The Global Times, that ever-gracious tabloid, called it a “slap in the face” for western media.
But the reality is not so rosy, as much as these figures should be welcomed. China’s growth is not only good news for its people, who have suffered through an economic nightmare in the zero Covid years, but for the rest of the world as we face the very real possibility of a global recession. Rishi Sunak and most western leaders would kill for any growth at all. But in truth, the Chinese rebound is just a post-Covid bounce. The long-term outlook for the country’s economy – and its living standards – is perhaps the most grim it has been since the economy first opened up.
As recently as 2011, Beijing expected around 10 per cent GDP growth each year. You can question the accuracy of the numbers, but the reality is that everyone who lived in China could see and feel the breakneck progress. They include my family, who went from farm to city in one generation. Economists like Joseph Stiglitz started talking about how this would be the “Chinese century”, when the People’s Republic overtakes the US to be the world’s largest economy.
But now the optimism of those years is a relic. Young Chinese say they want to “lie flat” rather than enter an increasingly competitive jobs market, while billionaires tunnel as much money out of the country as they can. Homeowners are concerned about a potential housing market crash, with unprecedented boycotts on mortgage payments across dozens of cities last summer.
These less happy tales are reflected in this week’s numbers too, though the Global Times isn’t talking about that. Private investment has barely growncompared to Q1 2022 – an indictment on the lack of business confidence in the country. Real estate investment actually fell, by almost 6 per cent, suggesting the property market is still in the danger zone. And, perhaps most worrying of all for the CCP, youth unemployment continues to be at near record highs, with almost a fifth of 16 to 24 year olds out of work. Beijing may have bought acquiescence from my parents’ generation with economic competence, but that argument is difficult to make to younger Chinese when their prospects are so thin.
Some of these are symptoms of structural issues, like the debt racked up by government and companies alike (driving growth through infrastructure spending or building new homes). Some reflect long term changes, such as the rapidly ageing population, made worse by almost four decades of the now-defunct one child policy. India will officially overtake China as the world’s largest country this year.
But others come from more recent and self-inflicted blows, like Beijing’s crackdown on the country’s highly successful tech entrepreneurs or the zero Covid years which shuttered so many businesses. The US-led campaign to decouple has also stung, judging by the 15 per cent drop in China’s output of semiconductors after Washington’s introduction of the CHIPS Act.
Even the most bullish economists are rethinking their forecasts. In January 2021, the Centre for Economics and Business Research, a UK think tank, argued that the Chinese economy will overtake the US by 2028. In 2022, that date was revised to 2030. And now, in its latest prediction this year, the CEBR guesses 2036, with a big caveat that this point may never come if China invades Taiwan. Other economists are less optimistic.
So Beijing should celebrate its 4.5 per cent growth while it can – it’s from a historically low base, after all. But what will next year bring, and the years after that? According to some, the Chinese government shouldn’t expect more than 2 to 3 per cent growth each year. If so, the days of miracle growth would be over. China will still be a powerful challenge to the US-led world order. But at this rate, the postulated “Chinese century” may be a tomorrow that never comes.
www.telegraph.co.uk
So when newly released figures from this week showed that the Chinese economy grew by 4.5 per cent in the first quarter of 2023, Beijing and its usual defenders were jubilant. March retail sales were up 10.6 per cent compared to the previous March, while exports were up nearly 15 per cent. New home prices rose at the fastest pace in 21 months. After the annus horribilis of 2022, China is on track to hit its GDP growth target in 2023 (5 per cent). The Q1 rebound has exceeded expectations. The Global Times, that ever-gracious tabloid, called it a “slap in the face” for western media.
But the reality is not so rosy, as much as these figures should be welcomed. China’s growth is not only good news for its people, who have suffered through an economic nightmare in the zero Covid years, but for the rest of the world as we face the very real possibility of a global recession. Rishi Sunak and most western leaders would kill for any growth at all. But in truth, the Chinese rebound is just a post-Covid bounce. The long-term outlook for the country’s economy – and its living standards – is perhaps the most grim it has been since the economy first opened up.
As recently as 2011, Beijing expected around 10 per cent GDP growth each year. You can question the accuracy of the numbers, but the reality is that everyone who lived in China could see and feel the breakneck progress. They include my family, who went from farm to city in one generation. Economists like Joseph Stiglitz started talking about how this would be the “Chinese century”, when the People’s Republic overtakes the US to be the world’s largest economy.
But now the optimism of those years is a relic. Young Chinese say they want to “lie flat” rather than enter an increasingly competitive jobs market, while billionaires tunnel as much money out of the country as they can. Homeowners are concerned about a potential housing market crash, with unprecedented boycotts on mortgage payments across dozens of cities last summer.
These less happy tales are reflected in this week’s numbers too, though the Global Times isn’t talking about that. Private investment has barely growncompared to Q1 2022 – an indictment on the lack of business confidence in the country. Real estate investment actually fell, by almost 6 per cent, suggesting the property market is still in the danger zone. And, perhaps most worrying of all for the CCP, youth unemployment continues to be at near record highs, with almost a fifth of 16 to 24 year olds out of work. Beijing may have bought acquiescence from my parents’ generation with economic competence, but that argument is difficult to make to younger Chinese when their prospects are so thin.
Some of these are symptoms of structural issues, like the debt racked up by government and companies alike (driving growth through infrastructure spending or building new homes). Some reflect long term changes, such as the rapidly ageing population, made worse by almost four decades of the now-defunct one child policy. India will officially overtake China as the world’s largest country this year.
But others come from more recent and self-inflicted blows, like Beijing’s crackdown on the country’s highly successful tech entrepreneurs or the zero Covid years which shuttered so many businesses. The US-led campaign to decouple has also stung, judging by the 15 per cent drop in China’s output of semiconductors after Washington’s introduction of the CHIPS Act.
Even the most bullish economists are rethinking their forecasts. In January 2021, the Centre for Economics and Business Research, a UK think tank, argued that the Chinese economy will overtake the US by 2028. In 2022, that date was revised to 2030. And now, in its latest prediction this year, the CEBR guesses 2036, with a big caveat that this point may never come if China invades Taiwan. Other economists are less optimistic.
So Beijing should celebrate its 4.5 per cent growth while it can – it’s from a historically low base, after all. But what will next year bring, and the years after that? According to some, the Chinese government shouldn’t expect more than 2 to 3 per cent growth each year. If so, the days of miracle growth would be over. China will still be a powerful challenge to the US-led world order. But at this rate, the postulated “Chinese century” may be a tomorrow that never comes.
China’s miraculous growth machine is juddering to a halt
With economic forecasts now looking like wild overestimations, the ‘Chinese century’ is slipping from Xi’s grasp
www.telegraph.co.uk
