The economic growth of China is slowing

6 march 2019

The new bulletin of the Analytical Center on the current trends in the global economy is devoted to the economy of China. Over forty years, it has been growing annually at a pace significantly exceeding the world average rates of growth. The country ranks first worldwide in terms of GDP at PPP since 2014 and second only to the United States in terms of GDP at current prices. However, according to the authors of the bulletin, China’s economy slowed down in the past decade. The balanced economic and social development took back seat in pursuit of high growth rates and external expansion.

Social problems such as population aging, poverty, and extremely high and growing income inequality have become specific for the PRC. In addition, one of the negative effects of rapid industrialization and developed industry, which energy needs were met mainly by coal, was environmental degradation.

According to the analysts, the new economic model, announced in 2012, defines the personal consumption as the main growth driver for China. Nevertheless, leading international organizations expect a further slowdown in the PRC economy in the medium term.

High life expectancy (76.3 years in 2016) and the aging of the population in the absence of an effective system of social, pension and medical insurance may become a serious obstacle to further social and economic development. Moreover, an increasing proportion of the elderly population both increases the burden on the working-age population and stimulates the growth of the savings rate, which contradicts the plans of the government to make consumption a new growth driver.

In the 21st century, the social inequality in China remained at a high level, moreover, it has grown substantially and is constantly increasing. The key reason is a significant inequality of opportunities, namely the lack of access to higher education and financial services for a significant part of the population and uneven social protection.

According to the IMF estimates, the growth rate of the Chinese economy will decline due to the necessary tightening of financial regulation and increasing trade disputes with the United States. The reasons for the slowdown in the PRC economy may be a slowdown in industrial growth and company profits, as well as a reduction in infrastructure investment. At the same time, OECD experts expect that the increased rate of the VAT refund on export goods will reduce the negative effect of trade confrontation with the United States, and the easing of monetary policy will positively affect economic growth.

For more information, see the bulletin "Slowdown of the Chinese Economy".

For other bulletins on the current trends in the global economy, see Publications.