An economist warns that China could face a “lost decade” of economic stagnation akin to Japan’s if it fails to reform its economy amidst post-pandemic recovery struggles.
Concerns About Economic Growth
Rory Green, the chief China economist at GlobalData.TS Lombard, highlighted the possibility of China experiencing sluggish growth in a recent note. This scenario, resembling Japan’s “Lost Decade” in the 1990s, poses significant challenges to the world’s second-largest economy.
Challenges Ahead
China confronts various obstacles, including a property crisis, deflationary pressures, demographic challenges, and trade tensions with Western countries. These issues contribute to the uncertainty surrounding China’s economic trajectory.
Hesitation in Economic Stimulus
Despite acknowledging the risks of inaction, Beijing appears reluctant to stimulate the debt-laden economy. Past excesses, particularly in property and local government debt, pose dilemmas for policymakers as they navigate economic challenges.
Ideological Shifts in Economic Policy
Green observes an ideological shift in China’s economic policy since 2016. While some advocate for structural reforms to address underlying imbalances, others emphasize the need for growth stimulation. Chinese leader Xi Jinping emphasizes structural reform as a prerequisite for sustainable growth, although technocrats advocate for immediate reform to avert a lost decade scenario.
Path Forward
Amidst ideological debates and economic challenges, Green anticipates a gradual transition towards a new growth model. While Xi Jinping may eventually prioritize growth to ensure social stability, the process of economic reform and recovery is expected to be gradual.
Conclusion
China stands at a critical juncture, with the potential for a lost decade of economic growth looming. Balancing the imperative of reform with the need for growth stimulation will shape China’s economic trajectory in the coming years.
Leave a Reply