India's Chinese Takeaway

CHINA’S ECONOMY grew at 0.8 per cent sequentially in April-June 2023 over the January-March 2023 quarter. Economists now reckon that the target of five per cent growth for the full year 2023-24 is out of reach.

- Minhaz Merchant

Even with customary fudging, four per cent annual GDP growth is the best China can hope for. Global financial institutions believe China’s long-term economic growth rate could sag to three per cent a year.

Is China the new Japan, as I wrote in these pages several months ago? Shyam Saran, India’s former foreign secretary, is an astute China observer. In an op-ed for Business Standard on 19 July, 2023 Saran broadly agreed with the idea of China sinking into Japan-like stagflation: “During a recent visit to China, I had the opportunity to get a sense of where the Chinese economy was heading after the zero-Covid restrictions were lifted in November 2022. These pervasive restrictions on mobility had adversely affected both domestic and external economic and commercial activities. Chinese annual GDP growth had fallen to three per cent in 2022, the slowest in several years. The property sector, which has accounted for over 30 per cent of Chinese growth for years, has been hit by the imposition of much stricter regulatory measures. The property bubble has ‘popped’, leading to knock-on effects on other related sectors, particularly banking and finance.

China Has Been Hit by the Perfect Storm “One senior Chinese academic told me that the Chinese economy was in ‘dire straits’ and that the slowdown was likely to persist for at least three to four years. He added that for the first time in 40 years, Chinese employed in several sectors of the economy were having to accept salary cuts. While there may have been some years when incomes had not risen, this was the first time that a substantial number of people had lower incomes than before and were no longer optimistic about the future.”