Opinion | How China can achieve its next wave of economic growth

The headlines in 2024 have been mixed. China’s GDP is growing, though the precise rate is always a matter of debate. Youth unemployment, which shocked policymakers when it reached a peak of 21.3 per cent in June 2023, has declined to 17.6 per cent. And the property market crisis finally seems to be moderating, with transactions increasing following the government’s bold intervention to support the sector, which, directly and indirectly, accounts for almost one-third of the Chinese economy.

And yet, the dynamism that characterised China’s economy over the past three decades seems to be missing. Consumption growth is slow as apprehensive households maintain high savings rates. Likewise, foreign investors’ confidence is at an “all-time low”. As prices drop, fears of a deflationary spiral are growing, recalling the prolonged stagnation that gripped Japan beginning in the 1990s. Against this backdrop, some now argue that China’s economy has already peaked.

But such assessments are not particularly reliable. For starters, they mostly reflect the perspective of multinationals, concerned with their own profits, or foreign businesses and governments that take an adversarial view of Chinese growth.

This helps to explain why observers tend to focus on specific sectors, such as luxury goods or electric vehicles, which account for a small part of a vast and complex economy and are disconnected from the challenges confronting most of China’s 1.4 billion people and the government that manages their lives.

A second problem with much of the analysis of China’s economy is that it is not evidence-based. For example, international policymakers tend to fixate on consumption, which is low in China, even though the assumption that domestic consumption will boost growth is highly debatable. In fact, low consumption can reflect a wide range of problems which would not automatically be solved by inducing Chinese to consume more.