China’s National Bureau of Statistics (NBS) announced that the country’s annual GDP growth decreased to 3{d38a898658503095d09ccca72b3373e8fa824aa4f0215737cc70c89fc7ca3936}, much below the declared objective of 5.5{d38a898658503095d09ccca72b3373e8fa824aa4f0215737cc70c89fc7ca3936} in 2022, and that its economic slowdown may have global repercussions, according to Financial Post.
Vice-premier of the People’s Republic of China Liu He, who spoke at the World Economic Forum in Davos in 2023, effectively outlined the issues and difficulties that China and the world economy are currently confronting.
We have gone through a variety of unforeseen occurrences during the last five years, and we have seen significant shifts in the political and economic climate of the entire world. The theme of this year’s Annual Meeting, Cooperation in a Fragmented World,” is therefore more pertinent than ever He spoke.
China’s growth tale was shattered by the Covid-19 pandemic. Additionally, China’s GDP growth fell a little short of IMF projections made in October 2022. According to IMF forecasts, GDP growth would be about 4.4{d38a898658503095d09ccca72b3373e8fa824aa4f0215737cc70c89fc7ca3936}. USD 18 trillion in 2021, primarily as a result of the dollar’s strong increase against the RMB. According to Financial Post, this is the weakest expansion of the Chinese economy since the GDP increased by 2.3{d38a898658503095d09ccca72b3373e8fa824aa4f0215737cc70c89fc7ca3936} in 1974.
As evidence has emerged, China is struggling to maintain its miracle of continuous higher growth rates anywhere close to 10{d38a898658503095d09ccca72b3373e8fa824aa4f0215737cc70c89fc7ca3936} or more observed during the late 1980s and the entire 1990s. Observers have already been warning about China falling into the middle-income trap.
Kim claims that China’s productivity, which determines the country’s long-term growth rate, has significantly decreased.
Since 2014, the decreasing trend has been worse. China’s rapid expansion over the past 15 years has been mostly attributed to infrastructure spending on roads, homes, and manufacturing rather than structural change and innovation. According to Financial Post, extensive expansion driven by labor and capital input is not sustainable.
Numerous issues, most notably China’s isolation from the outside world as a result of the Zero Covid policy, were cited as the primary causes of the significant decrease in Chinese GDP growth in 2022. The rigorous “Zero Covid” policy, which resulted in recurrent lockdowns and the Communist Party’s campaign against major industrial companies, as well as the ongoing real estate crisis, were mostly to blame for the poor progress.
The most alarming finding from the NBS statistics is that China, the so-called manufacturing powerhouse of the globe, had a very weak rise in industrial output in 2022, at 3.6{d38a898658503095d09ccca72b3373e8fa824aa4f0215737cc70c89fc7ca3936} year over year, and even weaker in December, at 1.3{d38a898658503095d09ccca72b3373e8fa824aa4f0215737cc70c89fc7ca3936}. An increase in COVID outbreaks and weak demand in November, according to senior NBS statistician Zhu Hong, reduced industrial production and put more strain on Chinese companies.
The Financial Post quoted him as saying that the factors weighing on the poor industrial growth included a compression on profits from anti-virus limitations in major manufacturing hubs like Guangzhou and Zhengzhou, as well as from the ongoing weight of a lengthy real estate crisis and declining exports.
According to NBS data published on November 22, profits decreased across 21 of 41 key industrial sectors, with the ferrous metals smelting and pressing sector experiencing the worst fall at 94.5{d38a898658503095d09ccca72b3373e8fa824aa4f0215737cc70c89fc7ca3936}. Comparatively, the decline during the first 10 months was 92.7{d38a898658503095d09ccca72b3373e8fa824aa4f0215737cc70c89fc7ca3936}.
The fact that many Chinese businesses are also subject to US and other Western penalties, particularly targeting Chinese IT firms that are allegedly infringing on data security and stealing patents, is another factor contributing to the industrial slowdown.
When asked about the Chinese government’s artificial intelligence initiative at the WEF, FBI Director Christopher Wray stated that he was “very concerned” because it was “not bound by the rule of law.”
