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.

Tags:
Related Posts

Post
Japanification risk – down, but not out
Our updated analysis shows that the risk of 'Japanification' – a lengthy period of low growth and low inflation or deflation – has increased in Asian economies like China but declined in Europe. However, some of the changes may not be permanent. Economies are still settling down after the upheavals of the pandemic and some key underlying drivers of Japanification remain in place.
Find Out More
Post
US Tariff Monitor – Sooner rather than later
President Trump launched the first salvo in what will like turn into another global trade war. A 10% additional tariff on imports from China went into effect on February 4 and the Chinese responded with a series of retaliatory steps.
Find Out More
Post
Chinese policy is unlikely to shift due to announced tariffs
US President Donald Trump's announcement of an additional 10% tariff on imports from China was in line with our baseline expectation. But the immediacy of implementation, the blanket style of tariffs, and the inclusion of stronger language around retaliation in policy documents still add significant uncertainty to our forecasts.
Find Out More