The Chinese economy appears to be transitioning from a period of rapid growth into a longer-term slowdown. This assessment comes from a Wall Street Journal analysis by Lingling Wei and Stella Yifan Xie.
The clues are visible not only in muted national data but also in distant provinces such as Yunnan in the southwest. Yunnan has announced plans to spend millions on a new COVID-19 quarantine facility nearly as large as three football fields, illustrating a policy shift that has already been written off by policymakers in recent months.
Over four decades of expansion have enabled Chinese authorities to support business creation, fuel a booming real estate market, and weave an expansive road and infrastructure network. These moves helped lift millions out of poverty and position China as a major global trading power, with an export footprint that reaches around the world.
Analysts say this growth model has exhausted its fresh opportunities for expansion, and Beijing faces a ceiling on infrastructure-driven stimulus. Some regions report bridges and airports that see little use, and millions of apartments remain unoccupied, a pattern that has raised concerns about returns on large-scale investments.
Beyond spending choices, the economy confronts a difficult demographic landscape and a widening gap with Western economies. This is not just a phase of weakness; it could mark an end of a long era of rapid expansion.
The International Monetary Fund has projected GDP growth below 4% in coming years, a level that would be markedly slower than the pace of the last decade. By comparison, some forecast models suggest growth could slow from roughly 5% in 2019 to around 3% in the near term and potentially near 2% by 2030. If these trajectories hold, Beijing may struggle to realize a doubling of GDP by 2035 as had been discussed in policy circles a few years ago.
What is hindering Beijing’s growth?
One prominent issue cited is the country’s continued reliance on high debt. Data from the Bank for International Settlements shows that total Chinese debt rose to about 300% of GDP in 2022, surpassing the United States and bringing the debt burden primarily onto local governments. The IMF notes that Beijing curtailed direct borrowing by cities, pushing them toward off-balance-sheet financing, with total obligations swelling well past $9 trillion in 2023.
Some economists interviewed by the Journal warn that slower growth could usher in a long-lasting economic downturn similar to Japan’s experience after a housing crisis, which spurred years of deflation following a rapid period of expansion in the 1990s onward.
Southwest University of Finance and Economics in China has warned of a real estate cycle risk: by 2018, estimates suggested as many as one in five apartments across the country were unoccupied, a sign of slack demand and rising financing pressures on developers.
Experts suggest the logical remedy lies in boosting consumer spending and expanding services as a share of the economy. The aim would be to create a more balanced model, aligned with the patterns seen in the United States and Western Europe. World Bank data cited by the Journal indicate household consumption accounts for roughly 38% of China’s GDP compared with about 68% in the United States, highlighting the potential for a shift in economic composition.