During this first quarter of the 21st century we have become accustomed to China driving global economic growth. The world’s economists have overcome cognitive dissonance to become comfortable with an autocratic, hierarchical government being able to improve living standards for hundreds of millions of people in a matter of two generations, while dozens of countries in the global south have accepted China’s investment via the Belt and Road or other bilateral agreements, hoping some of China’s magic formula will rub off on them.
According to the International Monetary Fund, China will contribute a curiously exact 22.6% of global economic growth in the five years to 2028, ahead of India and the US, Europe and the rest of Asia. But China has struggled to accelerate away from the enforced hiatus of the pandemic. Consumer confidence has been stuck in negative territory since 2022. In China, consumption is only 53% of the economy compared to over 70% in most countries. But government policy does not include the kinds of reform that would release the population’s savings. Repeated announcements of fiscal and monetary loosening have done nothing to wake the slumbering dragon.
Now China faces trade wars with its main customers in the EU and the US, and is unable to export its way out of trouble any longer. So what happens next?
Read on here.
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