The Chinese economy has been facing the worst economic turbulence ever since the country plunged into the COVID-19 crisis in 2020. Since then, it has attempted to regain its economic slowdown but all the changes go in vain.
China's economy, the world's second-largest, is now in deep distress and its successful model of growth for 40 years stands "broken", a prominent American financial publication has said, noting that signs of trouble extend beyond China's dismal economic data to distant provinces. But, during the much-anticipated BRICS Summit, it is expected that President XI Jinping will push China's agenda of economic growth with his allies.
China is a core member of the BRICS group, which also includes India, Brazil, Russia and South Africa. The upcoming summit will be hosted by South Africa. All Business Councils from the BRICS countries are expected to bring large delegations to participate in sector-focused visits to various South African areas.
Economists now believe China is entering an era of much slower growth
The Wall Street Journal in a major Sunday story wrote that economists now believe China is entering an era of much slower growth, made worse by unfavourable demographics and a widening divide with the US and its allies, which is jeopardising foreign investment and trade. Rather than just a period of economic weakness, this could be the dimming of a long era, it commented. "Now the (economic) model is broken," the financial daily said.
“We’re witnessing a gearshift in what has been the most dramatic trajectory in economic history,” Adam Tooze, a Columbia University history professor who specialises in economic crises, was quoted as saying by the Wall Street Journal.
According to the report, the total debt, including that held by various levels of government and state-owned companies, climbed to nearly 300 per cent of China’s GDP as of 2022, surpassing US levels and up from less than 200 per cent in 2012, according to Bank for International Settlements data. In Beijing’s corridors of power, senior officials have recognised that the growth model of past decades has reached its limits, the daily wrote.
You can’t walk the old path with new shoes: Jinping
In a blunt speech to a new generation of party leaders last year, Jinping took aim at officials for relying on borrowing for construction to expand economic activities, it added. “Some people believe that development means investing in projects and scaling up investments,” Xi said, warning: “You can’t walk the old path with new shoes.”
Xi and his team so far have done little to shift away from the country’s old growth model, the financial daily wrote. China's gross domestic product (GDP) grew 5.5 per cent year-on-year in the first half (H1) of 2023, the country's National Bureau of Statistics (NBS) said in June.
China's GDP reached 59.3 trillion yuan (about 8.3 trillion US dollars) in the first half, according to the NBS data. In the second quarter, the country's GDP expanded 6.3 per cent year on year, China's official media quoted the NBS as saying.
Meanwhile, China on Monday also trimmed for the second time this year its one-year loan prime rate (LPR) by 10 basis points from 3.55 per cent to 3.45 per cent and did not change the five-year rate, which stands at 4.20 per cent, to revive economic growth in the world's second-largest economy after that of the United States.
BRICS Summit could be a key changer for Xi Jinping
Most of the BRICS countries differ sharply from the position of the US and its Western allies in the Ukraine war. Speaking ahead of the meeting, the South African ambassador, Anil Sooklal, referred to the West's military aid to Ukraine as one of the things that “fuels the conflict.” Therefore, it is the best time for President Jinping to push his agenda to Asia as well as other nations that have applied for membership. If his planning goes well, it will be a breakthrough for the Chinese economy.
The BRICS summit is the first to be held in person since 2019 and comes as the bloc seeks new relevance amidst Russia’s war in Ukraine, South Africa’s crashing economy and sharpening competition between China and India.
As the summit is set to convene soon, around 20 countries have formally applied to join the alliance, including Argentina, United Arab Emirates (UAE), Saudi Arabia, Indonesia, Iran and Venezuela, said Brazilian Foreign Affairs Minister Mauro Vieira.
(With inputs from agency)
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