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World Bank Sees China’s Growth Sputtering to Slowest Rate Since 1960s

Hours after the People’s Republic of China celebrated its 74th birthday October 1 with fireworks and flowers, the World Bank cut its forecast for the country’s growth next year. 

The World Bank said in its semiannual regional forecast released Sunday that it now expected China’s economic output will grow 4.4% in 2024, down from the 4.8% it expected in April. The bank cited the persistent weakness of its property sector for the changed outlook. 

The bank also warned that east Asia’s developing economies, including China, are set to expand at one of the lowest rates “since the late 1960s,” excluding extraordinary events such as the COVID-19 pandemic, the Asian financial crisis in the late 1990s and the global oil shock in the 1970s.

The bank cut its 2024 forecast for GDP growth for developing economies in east Asia and the Pacific, which includes China, to 4.5%, down from the 5% rate expected this year, it said.

For 2024, the bank lowered its regional outlook to 4.5% growth from 4.8%, citing external factors including a sluggish global economy, high interest rates and trade protectionism.

Manuela Ferro, vice president of East Asia and Pacific at the World Bank, was quoted by Investopedia as saying the region is one of the “fastest-growing and most dynamic in the world, even if growth is moderating.” She said sustaining high growth over the medium term will require reforms to “maintain industrial competitiveness, diversify trading partners, and unleash the productivity-enhancing and job-creating potential of the services sector.”

Prior to China’s National Day on Oct. 1, President Xi Jinping gave a speech acknowledging that China’s path ahead would not be smooth sailing. 

“Our future is bright, but the road ahead will not be smooth,” Xi told his roughly 800 guests, some of whom were foreign diplomats, at the Great Hall of the People in the heart of Beijing. At the reception on September 28, Xi told his guests that China must continue to climb over “obstacles,” and the nation’s “strength comes from unity, and confidence is more valuable than gold.”

Tseng Chien-yuan, chairman of the New School for Democracy, a Taiwanese organization that supports human rights activists, told VOA Mandarin that Xi’s speech shows China faces challenges that include the sluggish domestic economy that continues to recover from Beijing’s strict “zero-COVID” policy as it faces the global economic uncertainties triggered by Russia’s invasion of Ukraine.

Tseng said, “Xi Jinping’s remarks make people feel that [he] is a little confused about the future, [but] he is also becoming more and more aware that the international situation China is facing is caused by his excessive political moves which led him into a dilemma.” 

Pressure from the property sector also appears to be weighing on China’s economy. On the day of Xi’s speech, the Chinese real estate giant Evergrande Group issued an announcement confirming that Hui Ka Yan, chairman of the company’s board of directors, had been arrested for suspicion of committing unspecified crimes. Stock prices of many of Evergrande’s subsidiaries fell in response. 

The Wall Street Journal reported on Sept. 29 that due to the intervention of Chinese regulatory agencies, Evergrande may be split up or liquidated, which may upend China’s economy since the real estate industry accounts for as much as a quarter of China’s economy. 

The market consensus is that China’s economic growth rate this year will not reach the annual target of 5%, slightly higher than that of the World Bank.

According to statistics from Taiwan’s Central News Agency issued on September 13, at least 76 international financial experts and six multinational investment institutions shared the same view: China’s economic growth rate this year and next year will be lower than expected.

Although Japanese investment bank Nomura Holdings slightly raised its forecast for China’s GDP growth this year from 4.6% to 4.8% on September 28, the growth forecast for 2024 still remains at a low-end 3.9%. Nomura believes that the property market continues to deteriorate, and exports are weak. Other factors contributing to slowing growth include wavering confidence in private enterprises.

Ming Xia, a political science professor at the City University of New York, told VOA Mandarin the combined effects of economic weakness, the depreciation of China’s currency and plummeting real estate prices will leave Chinese consumers feeling battered.

He compared Xi with China’s former leader Deng Xiaoping, who promoted economic reform and opened up China to save the economy in the 1970s after the Cultural Revolution. Xi, according to Xia, seems unaware of the seriousness of the problems China faces and has yet to implement rescue measures. This makes it hard to boost the confidence of private enterprises or foreign investors in China in the short term, he added. 

Xia also said Xi lacks understanding of the global economy and wants to return to the old way of the state controlling the economy.

Source: VOA