What are China’s growth engines post zero-covid policy?
IMF predicts China’s GDP growth for the next coming few years to be around 5 to 6 %. In 2008 China’s Debt to GDP ratio was 139% and in 2021 it is 286%, which is 3 size its economy. They saw a huge Property Boom and also witnessed a crash in 2022. China Exports are reducing — in 2006 it was 36% and in 2021 it is 20%. What was working for China in 19s and 20s is not working anymore. China’s growth was due to Manufacturing, population, and property market — so what will be the new economic engines?
I feel and have faith that China will have an economic rebound in 2024 if they focus on these areas and make them their driving engines for their growth in the coming years:
- Investment: Economic headwinds that we all will face are inevitable, but China can focus and diversify its government investment in supporting small and mid-scale businesses. We need the world to recognize that china is leading in innovation. We especially need companies like Huawei, Alibaba & Tiktok that can put china on the global tech innovation map. Also, they can invest in infrastructure projects that can give them high ROIs. Due to covid, many small businesses and entrepreneurs have suffered. When I visited Shanghai and Shenzhen in Nov’2022 I saw many empty streets, which used to be happening areas in these cities back in 2019. Many have lost their job and has to shut down their business…. I hope china can find ways to bring them back and help them regain business momentum. Inspired by Prof. Tang’s point on immigration — I feel china has to open its borders to talented and skilled people to come in and pursue their entrepreneurial dream, as it has a lot to offer — capital, land, labor, and factories.
2. Properties Market: It’s hard to predict the implication of property market collapse in china at this point, but given my understanding, people in china still want to own homes and find property investment very critical. If China government can find a way to reduce colossal debt and shape the property market, we can expect .05% growth from this sector.
3. Domestic Consumption:– As per the data shared in the class, we can see that Chinese consumers have been saving a lot of money in the last 3 years due to future uncertainties. Due to pent-up demand, consumption rebound will happen in 2023 in the travel and tourism industries. Household spending can be increased if china can start rolling out consumption coupons, offering subsidies for rural purchases of durable goods, and offering tax exemption for specific sections.
4. Net Exports / Manufacturing :I feel it’s hard to replace china as the world manufacturing hub anytime soon, having said that, China should deeply implement China + policy in their supply chain, work closely, and have trade policies with countries like Thailand, Vietnam, Philippines, and Indonesia to ensure their supply chain is robust and western countries feel comfortable in embracing china as an ecosystem player instead of cutting them off or isolating them. China can present itself as an inclusive economy that whats to grow with others and is comfortable sharing world power with the rest of the other countries.
5. Clean Energy: it is a real problem that will enrapture my western media to fit their biases that china is the biggest carbon emission country in the world and is dealing with climate change issues. China spins this to its advantage by showing how they are transitioning to clean energy by deploying wind plants in the west of china, apart from having China currently owns the second-largest solar plant in the world. Following the commitment to net zero by 2060, china can set a good example and drive more clean energy businesses.
