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Can China still become the world’s largest economy? | Business Beyond

Mar 15, 2024
It is the most impressive economic success story of our time, but today that success looks more shaky than ever in the past 20 years China rose through the

world

's economic rankings achieved the fastest sustained growth of any major

economy

on record now its size continues being second only to that of the United States China's rapid rise fueled predictions that it will soon

become

the

world

's

largest

economy

. Now the country's prospects are clouded for the first time in two decades. China's economic output will fall behind that of the rest of Asia. A slowdown in growth is leading many experts to reconsider when China might overtake the US, and if it ever does, in this episode we'll look at the issues underlying China's cooling economy. the lifting of covid does not necessarily change or solve China's structural economic problems.
can china still become the world s largest economy business beyond
It is difficult to maintain dynamic growth when the workforce is shrinking if you are trying to export to the rest of the world and domestic demand is

still

very weak. I really think that puts a limit on your growth fundamentally. We will evaluate international factors that threaten growth. The external environment in China is really as bad as any other. You could look back on it from the Mount Zitong era and we'll wonder if China can

still

be the

largest

economy in the world and China is still the largest exporter in the world, it's still the largest manufacturing center in the world and the domestic market is huge, so what if China does not manufacture That is the point to overtake or overtake the US by 2027 or 8, it will never achieve it.
can china still become the world s largest economy business beyond

More Interesting Facts About,

can china still become the world s largest economy business beyond...

All that is yet to come. Beyond 2010, China's GDP growth stood at an impressive 10.6 percent; Since then, the pace of expansion has slowed according to IMF forecasts. Its GDP growth will continue a downward trend even after the pandemic, in the coming years it expects growth to be below 5, although some forecasts are slightly more optimistic. A major factor affecting the pace of economic growth is the zero-greed policy that dominated life in China. during the last three years While most countries in the world began to reduce their pandemic measures in 2022, China tightened its grip at the time when the Chinese economy's growth rate is not very high, but there are several reasons behind this.
can china still become the world s largest economy business beyond
The most important reason is the pandemic. Draconian measures to contain the virus sapped domestic consumption, crippled small

business

es and kept China's factories closed. They also ultimately sparked the most widespread anti-government protests in decades. In December 2022, the Chinese government revoked the controversial release policy. its control over the economy, but many analysts believe that the end of zero coverage in China will not signal the revival of economic growth as we know it. The lifting of covid does not necessarily change or solve China's economic structural problems to look beyond the short term. and understand the underlying factors holding back economic growth in China, it is worth reviewing how its economy flourished in the first place half a century ago.
can china still become the world s largest economy business beyond
China was reeling from 10 years of political and social chaos that Mao Tsitung's so-called cultural revolution sought to wage. the country of any vestiges of capitalism, but everything changed with the death of Mao Tsitung and the eventual rise of Deng Xiaoping in the 80s, then Purchases and his colleagues decided to send China towards a different route compared to the communist, the Socialist period China was the king to liberalize. to open up to embrace the global market the country transformed cities factories and universities began to fill with manufacturing technology and entrepreneurship exploded China's middle class was thriving purchasing tank reforms woke up a sleeping economic superpower you get everyone in your children in primary and secondary school you move labor from low productivity agriculture to higher productivity Manufacturing in urban areas and you do these types of things and if you are really good at doing them and you are very effective at doing them, obviously the rewards are In the case of China, China's fundamental reforms reconciled its economy with global trade rules and opened the door to the World Trade Organization in 2001.
China experienced extremely high-speed growth after attempting to join the WTO within six years of joining. growth averaged a surprising 12 percent cheap labor and its integration into the world economy fueled the rise of China, it became the world's largest exporter, the economy grew very quickly until the global financial crisis occurred in 2008, China It was not affected immediately, but indirectly. Export orders from Europe and the United States dried up during the financial crisis, so China began pumping more money into its own economy to create jobs that paved the way for one of the biggest threats to the Chinese.
The economy is facing debt today, so from 2010 or 2009 until about 2020 until Covid China reached these enormous depths uh Jamboree um and um and really accumulated more depth than anyone could have predicted or would have expected the Chinese government protected its economy with bricks and mortar. and it worked China's investment boom kept economic growth close to 10 percent even after the crisis, but shoring up the economy with infrastructure Investments meant the government had to keep building eventually you'll have enough Ports roads airports China's rail system China's high-speed rail network illustrates its inefficient spending: the country has the longest high-speed rail network in the world, but despite excess capacity, financial losses increase, the network continues to grow even in less populated places where there is not much demand, now maintenance costs and interest payments have exceeded the railroad's revenue.
They've overbuilt local infrastructure, so on the one hand, if you travel through China, it's very impressive that they have all these highways, high-speed rail airports, but a lot of them are severely underutilized and, frankly, some of them They are white elephants that are not. generating much additional economic activity from 2008 to 2021 more than doubled, from 140 to 286 percent of GDP Today, China's total debt is three times the size of its economy, much of that debt did not end up on the balance sheet local governments relied on another indebted sector of the Chinese economy, the real estate sector, to raise money for Beijing's plans.
Local governments began selling publicly owned land to real estate developers, developers rushed to buy what was offered. Inflating a giant real estate bubble China had a real estate boom for a couple of decades, which was massive, it fueled a lot of optimism, it fueled a lot of risk taking, um, very, very bad, um, the real estate developers took on too much debt, um, the Households began to take on large mortgage debt um, it's a typical story, especially in smaller Chinese cities, housing construction began to exceed demand, giving rise to the so-called ghost towns of China, nowadays China has enough apartments unoccupied to house the population of France with a mountain of real estate debt in Risk of collapse: the government tightened restrictions on property, but everything started to go wrong around 2021.
The government introduced regulations that attempted to limit liabilities and restrict balance sheets of the real estate developers and what we finally got was a bankruptcy in 2022. Which has scared the government because the consequences have been really harsh. Hundreds of thousands of people own properties that developers can't finish because they are bankrupt and there is a lot of debt in the sector in recent history. has seen big real estate developers like evergrad default now all people's savings are at risk banks are in trouble and local governments are drowning in debt now local governments of course have no means to obtain financing because of course Of course, land sales were the biggest earners, but what do China's debt difficulties mean for its economic trajectory?
For many years we have argued that China cannot go into crisis, you know, I have been saying this for many years, that it is almost impossible for many reasons because China is so controlled. the banks control blah blah blah and some kind of virtual circle, everyone helps each other, that's fine the moment you start having too much debt, then you have to issue more debt just to pay the interest payments, or you have to reduce spending and reduce it. Spending is very difficult in the midst of a health crisis that is basically ongoing to reduce its giant deficit.
China's authorities will have to cut spending, which means they will have to deviate from the strategy that propped up its economy in the first place. This will continue. be a drag on the Chinese economy because companies and governments always have to pay their debt, regardless of the income they earn, they always have to pay interest basically and that limits the amount of investment and also consumption is another cloud in the outlook from China. free its economy from public debt and real estate the country needs to strengthen another economic engine demand Chinese consumers need to spend more but that is not what is happening harsh pandemic measures suppressed consumption for the last three years but zero greed does not It's the only reason people in China hold on to their cash today China Chinese save for their future because public welfare plan still doesn't cover the entire population China has one of the highest national savings rates of the world.
Analysts agree that a big reason is a fragile social safety net, once you retire, you don't know how you are, how you're going to support yourself, etc., etc., and when people who don't necessarily have a good health get sick. access to the health care system. They are afraid of getting sick because they cannot afford to go to the doctor. Another reason consumers aren't driving enough growth in China is something we're already familiar with. The problem with the middle class is that, on the one hand, if necessary, they do it. suffering from this arms race, you know, the competition to spend on your children's education and, on the other hand, you also have to buy a house and the real estate market is for a long period of time, it is very expensive, housing is very expensive. in China and that contributes greatly to the fact that Chinese households have actually been shifted from savers to highly indebted and to the elimination of mortgages now that the covert zero-page policy is coming to an end, many analysts say that alleviating anxieties around money is key to unlocking a new phase of growth that many economists, including Chinese ones, are even now trying to tell the Chinese government that they need US or European-style fiscal stimulus, which mainly benefits the homes.
You simply transfer money to households, to you. I know we'll give them additional purchasing power, huh, but up to this point, the Chinese government has refused to increase demand. This comes at a price that the Chinese government has been unwilling to pay until now. China no longer has physical space. China's public debt is very high and it is engaging in a massive increase in military spending, so the room for the welfare state, you know, for a kind of space for consumption, which is another important factor in supporting the consumption, it's not really there and China is dealing with another one. internal problem demographic change China is the fastest aging country on Earth, not the oldest, which is Japan, but it is aging faster than almost any other country.
New births in China have fallen to record lows in previous decades. Women had an average of 2.7 children in 2021, that number. fell to 1.2, significantly below 2.1, the rate needed to sustain a country's population size in 2023. China's population fell for the first time in decades. The United Nations projects that China will lose its status as the world's most populous country this year. The policy imposed from 1980 to 2015 is one of the reasons behind the demographic crisis, but although today it is allowed to have more than one child, many young people still reject the idea of ​​​​having larger families or having children, but hey, yes women are educated, women have a career, their priority is not to stay at home and give birth to children, finally, there is also the problem of raising a child is expensive, you know, raising Edge, there are systematic studies that They show that raising a child in big cities and China is even more expensive.
In major cities in western China, population is at a tipping pointwith profound ramifications for its future. During the period of its steepest economic rise, the country benefited immensely from a demographic dividend, had a huge workforce to staff its factories, and now the landscape is changing. Your workforce has peaked and is going to start shrinking It's hard to maintain dynamic growth when the workforce is shrinking If shrinking population means there are fewer workers and having fewer workers raises wages, experts warn because of this China will have a harder time. To feed the global appetite for cheap imports well, it would be necessary to make people who are still working more productive or it would be necessary to use robots or something capital intensive.
A growing population of seniors will also put pressure on the country's already insufficient funds. pension system and this means that the burden of dependence of older people on the working age population is going to increase and this is usually associated with a sort of more depressing growth picture. Demographic change is a long-term phenomenon, so the Chinese government still has room to respond, it has already switched to a three-child policy that includes better maternity benefits, cheaper education and childcare, so far it has not yielded results solids, the government can also potentially extend the retirement age or delay the retirement age instead of people saying hey, how about they go back to the age of 50 or 55, they can extend it to 60, same thing In many Western countries, China is heading toward a demographic dilemma, but it could still be time before its shrinking population also reduces economic growth.
At least in the short term, the Chinese workforce is relatively strong and for those people who are the backbone of the economy. The workforce is, you know, the one-child degeneration or, you know, the 80 people who were born after the 1980s, so they're still robust, the workforce is highly skilled and they're a workforce. of higher quality compared to the previous generation it is not just what is happening within China's borders that threatens economic growth the international environment that allowed its economic eruption is changing over the last 20 to 35 years China's increasing integration in the global economic system and its transformation into the largest exporting country in the world and the center of so many very, very complex supply chains, this has really been the bread and part of the bread and butter of um, as we say in English, of China's economic explosion today, as the world faces an economic slowdown due to rising inflationary demand for Chinese products. products has decreased exports of goods and services as a percentage of Chinese GDP decreased from 36 in 2006 to 20 in 2021.
Another important factor is that the world faces a future defined more by separation than by integration; The external environment in China is really as bad as anyone can remember since the Mount Zitong era because of geopolitics, export controls, decoupling, disengagement, the world's two economic superpowers are locked in a strategic competition that The trend was further exacerbated by the Covid-19 pandemic, which laid bare the practical cost of codependency. The United States has adopted a less friendly attitude toward China, concerned about China's rise as an authoritarian power trying to change the global order. I think Europe is also worried, but to a lesser extent than the United States and specifically that leads to several restrictions that the United States and Europe are transferring technology to China, trade and investment with China and all of that will slow down China's development.
In October 2022, the United States introduced a series of sanctions and regulations that not only target Chinese individuals and companies, but aim to hinder an entire industry. China is the largest producer of semiconductors in the world and they are used in many other products that the Chinese make, for example cars, and they are not technologically capable enough to compete with the true top end of the small guys. semiconductors, but they produce a large volume of mid-tech semiconductors and now the United States has imposed restrictions on the sale of equipment that makes sophisticated semiconductors to China without semiconductors.
Advanced semiconductors, there's actually not a lot of opportunity in the advanced type. In the technology sector, it is not clear to what extent the economic interdependencies between the two countries will be unraveled, but what is certain is that the environment that, once China flourishes, will

become

more ferocious and retard China's technological development, which It will be very expensive, but could China eventually launch its own chip-making machines and could it manufacture them? Advanced chips. I think China is still on the trajectory of developing its own technological capability, especially now that you know that many American scientists trained in China have returned to China, at the beginning of this video, we asked if China is still on the path to becoming the largest economy. biggest in the world.
The experts we spoke to described the superpower overtaking its economic plan as one of the things I think most international economic observers agree on. In fact, I think the Chinese government basically agrees with this too: the development model that worked so well for China during the 1990s and 2000s is no longer working so well for them, so all of this is to say brother, but as an emerging economy. China's rapid rise was fueled by population growth from urbanization and improvements in manufacturing as these economic engines slow down, others need to be fed, so it is a natural process, if I may say so, which is basically inevitable again, this is like gravity.
When countries develop, they become, I mean. Product growth is not the level of productivity growth that explains why economic growth is beginning to slow, but animals also believe that policymakers have the tools for a new type of economic growth, whether China actually catches it up. depends on policies depends on the government providing enough support to small

business

es whether the government is doing the right things to drive long-term technological progress when the government ensures that growth is sustainable and balanced China would benefit greatly if it could embark on policies that shift the focus of growth from investment in property and infrastructure to consumer spending and services.
China's economy is at an inflection point. What that means for his power. The world's largest economy has analysts divided. So if China doesn't make it a point to surpass or overtake the US by 2027 or 8, it will never make it in my opinion because the growth will not be strong enough. China needs to use these years to really make it to 2027-28, they could do it if the US goes into a very big recession, baby, could China grow in numbers? Yes, sure, but in terms of quality. I think there are many challenges. I think it could still happen because the scale is still very large.
China remains the world's largest exporter. It remains the largest exporter in the world. Largest manufacturing hub and domestic market huge as country emerges from three years of zero-greed rule its path to becoming world's largest economy has become more difficult Beijing's next move could determine whether China find a new stable direction or stagnate and that concludes this episode of Business Beyond. If you like what you see here, check out one of our other videos. A good place to start would be our episode on demographic change, goodbye and take care.

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