China’s Growth Could Slow to 2 Percent: Economist
Udumbara
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Amidst its trade war with the United States, China would be lucky if its economy could achieve 2 percent to 3 percent growth over the next few years, according to a former chief economist at the International Monetary Fund (IMF).
“For a long time, it’s been very concentrated on infrastructure and exports, and it seems to be just continuing that,” Kenneth Rogoff said of the Chinese economy.
In most countries, consumption accounts for at least 60 percent of national income, but in China it is “well under 50 percent,” he told The Epoch Times. “That’s a big missing source of demand.”
The official readout of the gathering, known as the fourth plenum, offered few details about how Beijing would achieve that goal, stating that the Chinese leadership promised more efforts to “build robust domestic market and work faster to foster a new pattern of development.”
“How do they plan to do that? That’s, I think, the really interesting question.”
Rogoff noted that China’s sluggish real estate market and fragile social security system make the goal of building a strong domestic market “very challenging.”
Another reason the goal of building a strong domestic market is difficult to achieve, according to Rogoff, is the lack of a comprehensive pension and health care security system in the communist country.
“China’s still living through the legacy of the one child policy,” Rogoff said. “One child has to take care of two parents plus possibly their own children, and they need to save for that. The migrants who move to the cities need to pay for their own education of their children. They have to save for that.”
“Healthcare is pretty minimal,” he said. As families have to save for their health care, “it’s very hard to get people to build consumption.”
Rogoff, currently a professor of international economics at Harvard University, said Chinese leadership needs to develop a new strategy that focuses on boosting domestic demand.
“Otherwise, China is in danger of being caught in what is sometimes called the middle income trap, where countries reach a certain level of income ... or even in China’s case, call it middle income, but then is never able to go any farther.”
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At the conclave last week, the Chinese leadership reaffirmed its goal of becoming a moderately developed country by 2035, which would double the economy’s size from its 2020 level.
Despite Beijing’s optimism, Rogoff predicted China’s economic growth would to continue to slow.
China’s economy will “do well if it grows at 2 or 3 percent a year,” he said.
A spokesperson for the National Bureau of Statistics while releasing the figures on Oct. 20 pointed to “a complex and severe external environment” and economic restructuring pressures as key factors that led to the weak performance. Still, the spokesperson struck a confident tone, adding that “there are still many favorable conditions to achieve the annual growth target.”
Rogoff, who served as chief economist at the IMF from 2001 to 2003, also said he doesn’t expect that the statistics released by the Chinese regime, claiming 5 or 6 percent growth, show the full picture of China’s economy.
“The official numbers may show that, but I think true accounting would have China’s growth slowing down,” he said.
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