Chinese growth is set to be slashed in half in the next decade, according a report on the country’s changing economy covered by the Wall Street Journal.
The report from the Conference Board says China is heading for “a long, slow fall in economic growth,” down to about 3.9% between 2020 and 2024. The government is aiming for a 7.5% expansion currently, but growth was regularly in double figures in the decades before the financial crisis.
The WSJ also reports that productivity decline is one of the Conference Board’s major concerns: investment in China doesn’t have the same whopping returns it previously did, and the country’s property sector is looking increasingly shaky.
A chart from Insee, France’s statistical agency, shows that Chinese growth has already slowed to near the lowest levels in the last decade. A further decline below 4% would cut the country’s growth to its lowest level in at least 35 years.
The decline expected by the Conference Board is quicker and more severe than those expected by most international institutions, though most agree that a slowdown is on the cards.
International economist Michael Pettis outlined this weekend just how hard China’s slowdown could hit the world, given the massive position the country now takes in the global economy. Perhaps the most scary section is here:
I have studied most of the major growth miracles of the past 100 years (and directly experienced some), and in every case there have been pessimists that predicted a difficult adjustment process with much slower growth. In every such case, however, these pessimistic predictions were met with general incredulity (and for some odd reason almost always written off as “wishful thinking”) but while I have indeed found that the pessimists have always been wrong, it always turned out that they were wrong because actual growth turned out to be much worse than they predicted.