China's Japanese Syndrome

IS CHINA'S MIRACLE ECONOMY catching the Japanese disease? The signs have been apparent for some time: a shrinking population, ageing demographics and stalling economic growth.

- Minhaz Merchant

MINHAZ MERCHANT
The writer is the biographer of Rajiv Gandhi and Aditya Birla and author of The New Clash of Civilizations (Rupa 2014). He is founder of Sterling Newspapers Pvt Ltd., which was acquired by the Indian Express Group

Particularly worrisome for China's authorities is the weakness of the manufacturing sector. The Purchasing Managers Index (PMI) for manufacturing sagged from 49.2 in April 2023 to 48.8 in May 2023, indicating weak factory output.

China's exports have long fuelled economic growth but they too are slowing in the face of recessionary demand in the West. Chinese export growth in May fell to 8.5 per cent from 14.8 per cent in April.

China of course remains the world's largest exporter and the second largest economy. But the expected bounce-back from the aborted draconian Covid lockdown has been muted. The real estate sector, which accounts directly for 25 per cent and indirectly, through ancillary industries, for 33 per cent of China's economy, remains severely stressed.

Public and private debt is soaring. Municipal corporations across China have recently resorted to publishing advertisements in newspapers asking debtors to pay up. Local bodies are short of funds for development projects because borrowers haven't repaid loans or settled outstanding invoices.

Economic growth in 2023-24 is estimated to fall below five per cent. The chip war launched by the United States-led West is aimed at keeping China at least one generation behind in advanced chip technology. Japan too has joined the West in denying China its latest chip technology. Ever-thinner chips are driving a tech ecosystem based on artificial intelligence (AI) and deep machine learning.