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China will not become the first world power before the end of the decade as its leaders had hoped. The Covid, and other economic burdens hinder the realization of its ambitions.
The Middle Kingdom was already at the top of the bill. In terms of GDP, the second largest economy in the world was to overtake the United States by 2028 according to the British research institute CEBR – the Center for Economic and Business Research. But, in its annual report published at the end of December, the institute postpones this podium: the curve of Chinese growth will not cross that of the United States before at the earliest 2036. The Japanese center for economic research had also revised its projection to decline from mid-December. China’s star is fading rapidly in all international comparisons. This is the great lesson of 2022.
The Covid seized up the machine?
It was with the appearance of the coronavirus that the famous and vigorous Chinese growth, according to official figures, came to a halt. It is only 2.5% in 2020, i.e. half of the annual objective set at 5%. But in 2021 its rebound is spectacular, more than 8%. Xi Jinping wants to see this as the consecration of his zero Covid strategy. This forced isolation, this total closure of the country, will in fact prove to be a health impasse, a democratic denial and an economic havoc, with businesses paralyzed for a good part of 2022. The abrupt lifting of restrictions has relieved population but it has not yet put the economy back on track. Labor does not flow into the big industrial centers, because it is above all the hour of reckoning. Businesses and businesses have had to shut down for lack of staff or customers. Kristalina Georgevia, the director of the IMF, underlines that this year 2022 Chinese growth will be at best equal to, or even lower than, the world average, for the first time in forty years, a real snub for China. And it’s not going to get better very quickly in 2023.
Because other factors contribute to the decline initiated by the pandemic
In the wake of the collapse of developer Evergrande, which is still struggling to survive, other real estate giants are also struggling to avoid bankruptcy. The sector which represents a quarter of Chinese GDP, with construction, is still not out of the rut. The total amount of housing sales fell by 25% last year. The other engine of Chinese growth, trade, has also been experiencing failures for several months and the prospect of a global recession will no doubt discourage external demand. China, which has long benefited greatly from the opening of world trade, is now facing a wave of protectionism and relocation against it. Scarred by the setbacks of Apple and its Foxconn factory blocked by the zero Covid policy, multinationals now prefer other equally competitive countries. A major trend that will weigh on the recovery and on the mode of growth in China.
Internally, China’s economic growth is hampered by its demographics
The population is shrinking and aging. Not really enough to boost future growth. To ensure his compatriots the promised development, and win the competition against the United States, Xi Jinping will have to change the growth model. But for now he is prioritizing security issues. They become new sources of legitimacy to consolidate its power since the economic successes which filled this office are in the process of slipping away.