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Opinion Piece by Bill King: Diminished Growth Signals China’s Faltering Economy


Sep 5, 2023

For most of the last decade, the media narrative has focused on the idea that China’s economy would surpass the U.S. economy. However, there has been a significant shift in this narrative over the past year. The weakness of China’s economy has been highlighted, and there are frequent predictions about its future. Despite these challenges, China will still hold the position of the second-largest economy in the world for a considerable amount of time.

China’s economic growth began in the 1980s when Premier Deng Xiaoping implemented market-based reforms. This resulted in impressive growth, with China averaging over 8 percent annual GDP growth between 1980 and 2020. Over this time, China managed to eliminate extreme poverty on an unprecedented scale.

However, China’s growth peaked in 2010 and has steadily declined since then. In 2019, its growth rate dropped to just under 6 percent, the lowest since the early 1990s. The emergence of COVID-19 further exacerbated this slowdown, with economic growth crashing to below 3 percent in 2020 and 2021. While the pandemic was an external event, the slowdown in China’s growth was inevitable, and the pandemic only accelerated it.

One of the main challenges China faces is a demographic decline. It has joined a handful of countries whose populations have already begun to decrease. Economic growth is typically determined by changes in population and productivity. China will experience negative population growth in the future, making its growth entirely dependent on improving productivity.

Productivity is closely linked to a functioning market economy. Despite the criticisms of capitalism, it is evident that it is a powerful driver of innovation and productivity improvement. However, in recent years, China’s government, under the leadership of Xi Jinping, has been moving away from the market reforms implemented by Deng Xiaoping. This retreat from market reforms undermines China’s growth.

It is difficult to determine the motivation behind this shift, but it appears that the government is uncomfortable with the social and political changes prompted by a burgeoning free market. Civil disorder is a significant concern for the Chinese leadership, and finding the right balance between market-driven productivity and the pace of social and political change will continue to challenge China’s economy.

While China has experienced remarkable economic growth, the average Chinese citizen is still relatively poor compared to American standards. Chinese per capita GDP was just over $12,000 last year, which is below the U.S. federal poverty level and only 17 percent of U.S. per capita GDP. Additionally, a significant portion of the population does not have access to a sanitary sewer system, a problem more prevalent than in the U.S.

Residential living conditions also starkly differ between China and the U.S. Chinese urban residences have an average size of about 646 square feet, whereas the average size of a U.S. residence is 2,164 square feet. While circumstances have improved for the average Chinese citizen in recent decades, there is a growing expectation for continued improvement that will pose challenges for future Chinese governance.

The pressure to meet these expectations may explain why the Chinese government is willing to disregard established international norms, such as respect for intellectual property, in its pursuit of economic growth. However, failing to respect these norms will ultimately undermine China’s ability to grow its economy.

It is important to shift the perspective on the economic relationship between China and the U.S. While there may be elements of competition, it is not a zero-sum game. Both countries can prosper without dominating each other. Efforts to reshore critical manufacturing and hold China accountable for international norms should continue. However, it is important to recognize that China is an enduring presence and accommodation between the world’s two largest economies is necessary.

(Note: This content has been rewritten and condensed for better readability and paragraph organization)

By Editor

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