Pedro Molina

China’s Growing Growth Risks

If everything goes right for China, it will surpass the US as the world’s largest economy, at least in current dollar terms, by 2021, and its per capita income will reach that of today’s lower tier of high-income countries. But the Chinese economy faces looming risks in the coming decade.

BEIJING – If everything goes right for China, it will surpass the United States as the world’s largest economy, in current dollar terms (and more quickly in real terms), by 2021. Its per capita income will reach that of today’s lower tier of high-income countries. But, despite its forward momentum, the Chinese economy faces looming risks in the coming decade.

The immediate risk is continuing stagnation, or recession, in Europe. In the last decade, export growth has accounted for roughly one-third of China’s overall economic growth, and about one-third of Chinese exports went to the European Union. If the situation in Europe continues to deteriorate, China’s growth will be dragged down.

Over-tightening of domestic macroeconomic policies, especially those aimed at the real-estate market, could heighten the risk of a slowdown, with house prices currently falling across China, owing to stringent government measures. Indeed, the situation is much like that of the 1997 Asian financial crisis. In the several years before that crisis hit, China had been combating inflation, and appeared to be headed for a soft landing. But the combination of crisis and austerity condemned China to several years of deflation and considerably slower growth.

To continue reading, please log in or enter your email address.

To access our archive, please log in or register now and read two articles from our archive every month for free. For unlimited access to our archive, as well as to the unrivaled analysis of PS On Point, subscribe now.

required

By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in

http://prosyn.org/OnTvgzj;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.