China’s Growth Odyssey
China’s steadily declining rate of economic growth is a problem for both China and the world economy. Now that US President Donald Trump is set to wreak havoc on global stability, can China still hope to achieve the widely shared prosperity it has long sought?
SHANGHAI – Will China’s sociopolitical stability and economic dynamism continue to hold? It’s a question China-watchers are asking more frequently now than at any time in the past three decades. This fall, the 19th Congress of the Communist Party of China will decide (or not) President Xi Jinping’s successor in 2022, while also replacing (maybe) five members of the seven-member Politburo Standing Committee. The result, one hopes, will not be a new period of turbulence like that which the election of Donald Trump has unleashed on the United States.
The potential for political uncertainty in China comes at a time when its economy’s health seems to be waning, and when Trump’s presidency could pose a direct challenge to its growth model. From 1979 to 2010, China’s GDP increased at an average annual rate of 10%, generally exceeding the government’s target (the exception being the 1989-1990 period, following the mass incident at Tiananmen Square). But then growth slowed to 7.9% in 2012 and 7.8% in 2013, leading the government to declare a “new normal.” When growth slowed further, to 7.3%, in 2014, and remained sluggish the following year, the government announced that the target growth rate for the next Five-Year Plan (2016-2020) would be 6.5-7%. Sure enough, the growth rate has continued to slide, to 6.9% in 2015 and 6.7% last year.
The steady deceleration of economic growth since 2010 has become an albatross around Chinese policymakers’ necks. Properly diagnosing the cause, and formulating the right policy response, will not be easy. But whether China succeeds will have far-reaching implications for the world economy, especially now that Trump is confirming worst-case scenarios regarding his administration’s impact on global stability and prosperity.