CHINA: DARK CLOUDS AND SILVER LININGS
China offers another circumstance study. The country’s second-largest economy grew by 5.2 per cent in real term next month. Contrary to the upbeat feelings in the United States, which increased by only 2.5 %, the economic sentiment in China has been gloomy.
Part of this is due to aspirations, against the landscape of past financial growth. China’s GDP growth has decreased from an average of nearly 10 % between 1979 and 2017, to an average of over 5 % from 2018 to 2023. Although China is expected to overtake the developed economies in terms of money, its levels are still only a fraction of what the United States’.
Beyond the title figures, it is clear that there are major challenges to the Chinese market. Given that the industry accounts for about 30 % of GDP, the home business crisis is looming large. Foreign direct investment has decreased while a sizable portion of the Chinese youngsters are pessimistic.  ,
To fully comprehend the situation, one needs to take a closer look at the factors contributing to China’s subsequent GDP growth.
While private enterprises have gained ground over the past decade, the share of state-owned enterprises ( SOEs ) have recently experienced a decline.
According to a report from the Peterson Institute for International Economics, the share of the state market in China’s 100 largest listed firms increased from 2020 to 2023, with State market capitalization increasing to 61 % in the first half of that year. Given that SOEs are perceived as less effective and innovative than their counterparts in the private sector, this does not have much to say about economic vitality.
However, the SOEs are frequently called upon to shore up the main government’s financial agenda. Lately, they were mobilized to buy empty homes with low-cost funding from the state. These techniques may promote title growth while concealing underlying market weakness.
On a positive note, China’s growth is increasingly driven by new technologies including renewable energy, electric vehicles ( EVs ) and artificial intelligence. In 2023, China’s clean energy industry accounted for about 40 per cent of the country’s economic growth, according to a recent World Economic Forum statement.
This coincides with President Xi Jinping’s stated goal of China transiting from high-speed rise to high-quality development. China must remain connected to global supply chains and business networks in order for it to succeed while obtaining the necessary technologies and inputs to maintain its position as a competitive force.
However, the US and EU have increased tariffs on Chinese electric vehicles due to the Chinese government’s support for the EV business. China increasingly relies on local use to support growth because trade barriers restrict export growth possible. To prevent households from accumulating higher levels of cautious savings, social security may require basic reforms.