Sustaining Growth through the Recovery and Beyond. China Economic Update – June 2023

Sustaining Growth through the Recovery and Beyond. China Economic Update – June 2023

The World Bank (WB) presented a new report on China's economic development.

According to the organization, in the I quarter. 2023, China's GDP grew by 4.5% (compared to 3% in Q1 2022) and will amount to 5.6% by the end of the year. The lifting of COVID-19-related sanitary restrictions, increased consumer spending, government infrastructure development programs are key drivers of economic activity. Nevertheless, experts expect a slowdown in economic dynamics in the long term.

Economic growth is forecast to slow to 4.6% and 4.4% in 2024 and 2025. Among the main risks are excessive accumulation of household funds, a high level of debt in the construction sector, tightening financial conditions and increased geopolitical tensions. In addition, the growing level of debt in the non-financial sector (287% of GDP in 2022), income inequality, the high carbon intensity of the economy, and the aging of the population are additional factors that reduce investment attractiveness.

As the authors of the report note, innovative production and more efficient distribution of resources are necessary conditions for supporting high economic growth rates. In addition, experts call for structural reforms: the creation of a flexible system of social benefits, reducing the debt burden, reducing administrative barriers, and decarbonizing the economy.

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