Growth in developing East Asian economies will slow to some of the lowest levels since the late 1960s due to US protectionist measures and rising levels of government debt. The World Bank came to this conclusion, writes the Financial Times (FT).
In April, the World Bank expected China's economy to grow by 4.8%; now the forecast has been reduced to 4.4%. GDP growth for developing countries in East Asia and the Pacific (including China) has been reduced from April's 4.8% to 4.5%.
The region, one of the world's main engines of economic growth, is forecast to post its worst growth rate in half a century, barring extraordinary events such as the CORONAVIRUS pandemic, the Asian financial crisis or the global oil shock of the 1970s, the FT notes.
Economists expected China to recover more resiliently and significantly from the pandemic, said Aaditya Mattoo, chief economist for East Asia and the Pacific at the World Bank. In her opinion, the slowdown in growth will continue unless the Chinese authorities and governments of other countries begin “deeper” reforms of the services sector. The bank noted retail sales in China have fallen below pre-pandemic levels, household debt has risen, private sector investment has lagged and house prices have stagnated.
The situation is affected by the decline in global demand due to the general slowdown in global growth affecting all countries, as well as the fact that the region (not just China) is affected by new US industrial and trade policies, explains the FT.
Tensions between Washington and Beijing have benefited other countries in the region by boosting imports . However, the introduction of the IRA and Chips laws last year, aimed at creating manufacturing in the US and reducing dependence on China, has hit Southeast Asian countries. Eh, exports to the US have decreased.
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Ratings agency Moody's Investors Service last month warned that China's economic growth rate through 2030 would be under pressure. Analysts pointed to a number of structural challenges facing China - demographic aging, slowing productivity growth and declining returns on capital. In a worst-case scenario, China could return to traditional growth drivers such as real estate and infrastructure investment , in which case average annual economic growth would decline to 3.5% between 2023 and 2030.
WSJ analysts considered this dynamic the end of the country's 40-year economic boom, which "lifted China from poverty and turned it into a global giant." Beijing is running out of room to expand its infrastructure, parts of China have underused bridges and airports, millions of apartments sit empty and returns on investment have plummeted, experts said.
According to the FT, Chinese authorities are prohibiting local economists from commenting on economic problems, wanting bad news to be presented in a positive light. One expert at a closed conference in Beijing, in response to a question about deflationary risks, said: “As the entire market knows, there is no such thing as deflation in China.” He suggested talking about “low inflation” instead and urged audiences to exercise caution when publishing expert comments from the meeting. “It will be bad if you don’t see me tomorrow,” the economist added.