China’s race for growth is fading

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China’s race for growth is fading



Rishi Sunak and Keir Starmer are both putting faith in a five-point plan. Never knowingly undersold, China’s government announced last week that it’s going for a 31-point strategy.To get more news about china financial news, you can visit shine news official website.

Last week, there were alarmed faces in Beijing at the news that its GDP had improved by just 0.8% in the second quarter of 2023, prompting a sense that China’s economy needs a rapid boost. For the past few years, the private sector has been a target for high-profile crackdowns by the Chinese Communist party (CCP), worried that companies such as Tencent and Alibaba were enjoying too high a profile. Now, it says it wants to make the atmosphere for entrepreneurs “bigger, better, and stronger”.

This feels urgent, because China’s economic recovery seems to have stalled, and the CCP’s standing at home still depends on Xi Jinping’s government creating a “Chinese dream” of a middle-class lifestyle. The end of Covid restrictions, just eight months ago, seemed to mark the start of a powerful bounceback in consumption; travel agencies were besieged by people booking holidays they had been denied for nearly three years. But in the past few months there have been more worrying signs. Youth unemployment is growing: about one in five of China’s 16- to 24-year-olds were unemployed in June. Many university graduates have had to take jobs as delivery drivers because no professional jobs are available, and social media is awash with images of hard-earned but seemingly useless degree certificates.

In fact, there are plenty of jobs for those who want them. China has a severe shortage of teachers in the countryside, meaning that rural children tend to have a patchy education. But few urban graduates want to live in a village where running water is still a luxury, and China’s strict “residence permit” (hukou) system means young people who move to the countryside may never be allowed back to the big city.

In a few years, China will face the opposite problem. Thanks to three decades of the one-child policy, China’s working age population will shrink from the 2030s. Technology will need to adapt to create new jobs for a smaller workforce, while providing enough growth to pay for pensions and healthcare for the rapidly growing elderly population.

For years, if not decades, there have been predictions that China will become the world’s largest economy. But the current crisis might make it seem as if decline is now unavoidable. In fact, there are plenty of factors that could improve China’s situation. It spends 2.5% of GDP on research and development, an investment that pays off in areas such as its highly innovative technology sector. It also has the world’s second-largest single market after India, which this year became the world’s most populous country, and its population has a per capita average GDP of $12,000, more than twice that of India.

But China is laying traps for itself. “Security” has become the key political term: the word anquan has the double meaning of “safety” in Chinese, giving it a reassuring ring. Yet the term covers a wide range of issues, not just traditional military or national security, but economic and even cultural security. Press reports about the huge debts of local governments have been censored and journalists threatened with prosecution for endangering financial stability.