A leading American financial newspaper has said that China’s economy, the world’s second biggest, is in severe crisis and that the country’s “broken” model of development during the last four decades is visible even in outlying regions.
According to a large Sunday report in The Wall Street Journal, analysts are more pessimistic about China’s economic prospects because of unfavorable demographics and a growing gulf between the two countries, which threatens to dampen international investment and trade.
It speculated that the current economic downturn may signal the end of an entire era.
Currently, the (economic) model has been compromised, the financial daily said.
The Wall Street Journal cited Adam Tooze, a history professor at Columbia University who specializes in economic crises, as stating, “We’re witnessing a gearshift in what has been the most dramatic trajectory in economic history.”
Bank of International Settlements statistics shows that by 2022, China’s overall debt, including that held by different levels of government and state-owned corporations, had increased to about 300 percent of the country’s GDP, exceeding US levels and rising from less than 200 percent in 2012.
The newspaper said that high-ranking officials in Beijing have acknowledged that the economic paradigm of the previous several decades has hit a wall.
It also noted that in a forthright address to the next generation of party leaders last year, Chinese President Xi Jinping criticized government officials for using debt to fund infrastructure projects and fuel economic growth.
Xi added, “Some people believe that development means investing in projects and scaling up investments,” adding a caution, “You can’t walk the old path with new shoes.” The financial daily argued that Xi and his colleagues had done nothing to change the country’s outdated development paradigm.
The National Bureau of Statistics of China said in June that GDP growth in China for the first half of 2023 was 5.5% annually.
According to NBS figures, China’s GDP in the first half of the year was 59.3 trillion yuan, or almost $8.3 trillion US dollars. According to the NBS, China’s GDP grew 6.3% year over year in the second quarter, as reported by state-run media.
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To stimulate growth in the world’s second-largest economy after the United States’, China slashed its one-year loan prime rate (LPR) by 10 basis points on Monday, from 3.55 percent to 3.45 percent, while leaving its five-year rate at 4.20 percent.