Chinese growth to slow in coming years?
Source: IMF
Amidst the kerfuffle over China’s “spy balloon” floating over the US, and the inevitable political tensions and fallout, we focus on the International Monetary Fund’s (IMF) medium-term outlook for the world’s second largest economy. This is of great importance to Australia as China remains our largest trading partner by a long shot (followed by Japan, the US, and South Korea).
China’s economy is set to bounce back after the lifting of pandemic restrictions and lockdowns, providing a boost to the global economy. The economy is forecast to expand by 5.2% in 2023, compared with a disappointing 3% last year. That’s good news for China and the world as the Chinese economy is expected to contribute around a quarter of global growth this year. Even so, China faces significant economic challenges. The contraction in real estate remains a major headwind, and longer-term, other pressures on growth include a shrinking population and slowing productivity trends.
Growth of 5% is a long way off the remarkable average of 9% per annum the country has achieved since opening to the world in 1978 – but of course, this growth is now off a far larger base. Much is at stake for the rest of the world; when China’s growth rises by 1%, growth in other countries increases on average by about 0.3% according to the IMF. And the effect on Australia’s growth is far greater, especially in the form of our commodity exports, tourism, and education sectors.
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