China’s economy, which holds the position of the world’s second-largest, is currently grappling with significant distress, and its longstanding growth model of 40 years is now considered “broken,” according to a notable American financial publication. The Wall Street Journal, in an extensive report published on Sunday, highlighted the prevailing challenges faced by China’s economy, indicating that the signs of trouble extend beyond just dismal economic data and have begun to impact even distant provinces.
Economists are now of the opinion that China is stepping into an era characterized by notably slower growth, exacerbated by unfavorable demographics and a widening rift with the United States and its allies. This growing divide is jeopardizing foreign investment and trade relationships. The publication went on to suggest that this phase of economic weakness might not be a transient period but could signify the end of a prolonged era of robust growth.
The Wall Street Journal emphasized the significant shift in China’s economic trajectory, quoting Adam Tooze, a history professor at Columbia University specializing in economic crises, who described it as a “gearshift” in economic history.
The report also highlighted China’s escalating debt, which includes both government and state-owned company debt, reaching nearly 300% of the country’s GDP by 2022. This level surpasses that of the United States and indicates a significant increase from less than 200% in 2012, as per data from the Bank for International Settlements.
Within the corridors of power in Beijing, senior officials have reportedly recognized that the growth model that had driven the country’s success in the past decades has reached its limitations. Chinese President Xi Jinping himself addressed the reliance on borrowing for construction and economic expansion, cautioning that new investments cannot be approached using old methods.
Despite the acknowledgment of these challenges, the financial daily noted that President Xi’s team has taken limited action to move away from China’s traditional growth model. China’s GDP registered a growth of 5.5% in the first half of 2023, according to data from the country’s National Bureau of Statistics. The report underscores the shifting landscape of China’s economy and its evolving position on the global stage.
While China’s economy remains substantial, the Wall Street Journal’s report suggests that the nation is navigating a critical juncture that could redefine its economic trajectory and its role in the global economy.
Sources By Agencies