Research Briefing | Oct 13, 2023

Why we lowered our China medium-term growth forecasts

The combined large shocks from years of regulatory uncertainty, the prolonged zero-Covid policy, and a housing correction have undermined China’s supply-side potential more than we previously anticipated. We have therefore cut our estimates of China’s future potential GDP growth rates.

What you will learn:

  • Despite slowing, we still expect China’s economy to eventually converge with the US in GDP size by the mid-2030s. However, the bigger challenge for policymakers in the coming years is growth sustainability.
  • As the economy rebalances slowly towards a consumption-driven growth model – so a moderation in the contribution from capital – and amid a decline in the working age population, the outlook for China’s trend growth depends to a large extent on raising total factor productivity (TFP). Our base case assumes that continued reforms and the uptrend in R&D spending drive a recovery in TFP in the coming decades.
  • The risks to our already-cautious forecasts are still moderately skewed to the downside, particularly if the pace of capital accumulation slows more than we anticipate. Geopolitical tensions leading to more restricted access to technology will also pose a risk to productivity growth.
Back to Resource Hub

Related Posts

Post

India has an edge over Mexico, but is not the next China

Our tool suggests India is a strong contender. Holding India back is its low productivity per worker and poor education levels, but it still is the top-scoring emerging market.

Find Out More
EV charging station

Post

What would be the implications of tariffs on Chinese EVs?

Announced tariff increases by the US and EU on made-in-China EVs, if implemented, will increase EV prices and reduce demand. This will slow the adoption of EVs globally, to the detriment of the energy transition.

Find Out More

Post

The bullish structural case for gold

In light of the recent consolidation period, we think there is still time to capitalise on the gold price upswing that started in Q4 last year.

Find Out More