China boasts the world’s second-largest economy, yet in recent times, its pace has been slowing down. This year, China has set its economic growth target at 5%. However, experts believe that achieving this target won’t be easy for China.
Let’s delve into why China’s pace is slowing down, whether it can achieve its target, and whether it poses concerns for the world.
What’s Happening?
According to the Deccan Herald, an official report released on March 5, 2024, states that China has set its economic growth target for 2024 at around 5%, similar to the previous year. While this target aligns with analysts’ expectations, attaining it won’t be straightforward.
The report suggests that to achieve this target, China plans to maintain a 3% budget deficit in its economic output, which is lower than the revised 3.8% from the previous year. However, crucially, China is also planning to issue special government bonds worth 1 trillion yuan (approximately 139 billion US dollars), which are typically not included in the budget.
Why is China’s 5% GDP Growth Target a Topic of Discussion?
According to the First Post, China has been advancing with double-digit growth for decades, but after COVID-19, this has become a distant dream. In 2023, China’s economy officially grew by 5.2%, its weakest performance in decades. Not only that, Chinese Premier Li Qiang has also admitted that achieving this year’s targets won’t be easy.
While China has been making headlines for several months, the country’s 5% GDP growth target has once again become a significant topic. Moreover, in January, consumer prices dropped by 0.8%, marking the largest decline in 15 years. To address some situations affecting its economy, China aims to maintain urban unemployment at around 5.5%, create 12 million new urban jobs, and target a consumer price index of approximately 3%.
Is Achieving the 5% Target Feasible?
According to Mint, Li Qiang himself admitted that ‘China’s economic recovery and growth foundation are not yet strong’. Moreover, there was no mention of any specific measures to boost demand.
Experts believe that ultra-long special treasury bonds, a 1% relaxation in fiscal deficits, and plans to replace old goods with new ones may not be enough to accelerate the current development rate. Furthermore, the World Bank has only estimated China’s economic growth for 2024 to be around 4.5%.
Here, you can also see China’s economic growth between 2011 and 2024:
The graph shows China’s real GDP growth during the period from 2011 to 2023, while the figures for 2024 to 2025 are projected.
China’s GDP Growth Since 2000
According to the IMF, in 2000, China’s GDP growth was 8.5%, followed by 8.3% in 2001, 9.1% in 2002, and 10% in 2003. Additionally, in 2007, there was an exceptional growth rate of 14.2%. 2007 was a time for China that has never been seen again, and in the following years, there has been a gradual decrease in GDP growth.
Not only that, if you look at the chart, you will find that in 2020, GDP was only 2.2%, and in the coming years, the IMF has not expected any significant growth.
The Future of Investment in China?
According to the First Post, China’s released economic figures haven’t reinstilled confidence among investors, and HSBC analysts note that while long-term growth was mentioned in the official speech, no concrete steps were outlined to stabilise the property market.
Moreover, Goldman Sachs’ chief investment officer, Sharmin Mossavar-Rahmani, also cautioned investors against investing in China at present.
Impact of China’s Slowdown on the Global Economy
According to Mint, the International Monetary Fund (IMF) recently reported an estimated global economic growth of 3.1% in 2024. This figure is significantly lower than the average of 3.8% from 2000 to 2019, primarily due to China’s slow economic growth. Consequently, there is an expectation that China and India will account for half of the global growth in 2024.
In light of facing challenges like wars and rising interest rates in recent times, the world hopes that China will successfully reduce its dependence on external demand and move away from excessive real estate focus to revive its economy.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
*Disclaimer: Teji Mandi Disclaimer
