China’s economy which is the second-largest in the world is undergoing deep distress as its successful model of growth for 40 years stands “broken”, according to a prominent American financial publication.
The Wall Street Journal in a major Sunday story noted that the signs of trouble extend beyond China's dismal economic data to distant provinces.
According to the publication, the economists now believe that the world’s second-largest economy is now entering a period of much slower growth which is made worse by unfavourable demographics and a widening divide with the US and its allies, which is hampering its foreign investment and trade.
Rather than just a period of economic weakness, this could be the dimming of a long era, it commented.
"Now the (economic) model is broken," the financial daily said.
“We’re witnessing a gearshift in what has been the most dramatic trajectory in economic history,” Adam Tooze, a Columbia University history professor who specialises in economic crises, was quoted as saying by the Wall Street Journal.
According to the report, the total debt, including that held by various levels of government and state-owned companies, climbed to nearly 300 per cent of China’s GDP as of 2022, surpassing US levels and up from less than 200 per cent in 2012, according to Bank for International Settlements data.
The senior officials in China have recognised that the growth model of past decades has reached its limits, the daily wrote.
It further said that Chinese President Xi Jinping, in a blunt speech to a new generation of party leaders last year, slammed the officials for relying on borrowing for construction for the expansion of economic activities.
“Some people believe that development means investing in projects and scaling up investments,” Xi said, warning, “You can’t walk the old path with new shoes.”
The Chinese President and his team have not done enough, or done little, to shift away from the country’s old growth model, the financial daily wrote.
According to the Chinese National Bureau of Statistics (NBS) in June, the country’s GDP grew 5.5 per cent year-on-year in the first half (H1) of 2023.
China's GDP reached 59.3 trillion yuan (about 8.3 trillion US dollars) in the first half, according to the NBS data. In the second quarter, the country's GDP expanded 6.3 per cent year on year, China's official media quoted the NBS as saying.
(With PTI inputs)
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