wei59_EBECCA BAILEYAFP via Getty Images_china growth REBECCA BAILEY/AFP via Getty Images

How Can the World’s Growth Engine Do Better?

The biggest threat facing the Chinese economy is a catastrophic debt-deflation spiral. To boost aggregate demand and prevent a prolonged period of deflation and stagnation, policymakers must adopt aggressive fiscal and monetary policies and reform China’s state-owned banks.

NEW YORK – The global economy demonstrated remarkable resilience in 2023, as the United States defied expectations and managed to avoid a recession. India, Vietnam, and Japan also achieved impressive economic performance given the circumstances. But while these countries have good reasons to be optimistic about 2024, China will most likely be the single largest contributor to global GDP growth this year.

This may come as a surprise to many, given the wave of increasingly gloomy forecasts for the Chinese economy. To be sure, China may not reach its full potential in 2024. Only by pursuing meaningful reforms and reaffirming economic openness (the two pillars of the country’s remarkably successful growth model over the past four decades) can it regain its lost momentum.

The relative contribution of a country to global GDP growth depends on both its share in the world economy and its relative economic growth. In purchasing-power-parity (PPP) terms, China’s share of the world economy was 18.8% in 2023, compared to America’s 15.4%. With the International Monetary Fund projecting that the Chinese economy will grow by 4.6% in 2024 – more than double the projected growth for the US – China, despite its ongoing slowdown, will likely account for a much larger share of global GDP growth than the US will.