China’s economic recovery ‘doomed’ as Beijing backs away from investment, think tank experts say

Chinese President Xi Jinping

Chinese President Xi JinpingJohannes Eisele/AFP/Getty Images

  • China’s economic recovery is virtually doomed, experts from the Council of Foreign Relations said in an op-ed.

  • The Chinese government has launched a consumption-led growth plan, which means the nation will shift away from investment.

  • But it risks triggering an intense backlash, experts have warned.

China’s economic recovery is doomed as President Xi Jinping is likely to abandon his plan to steer the economy away from its reliance on investment, think tank experts say.

In a Foreign Affairs op-ed published Thursday, Zongyuan Zoe Liu, a fellow at the Council on Foreign Relations, and Benn Steil, director of international economics at the New York-based think tank, highlighted Xi’s comprehensive plan for China. . the economy as the nation reopens and recalls its zero-COVID policies.

Late last year, the Chinese government announced an ambitious 12-year plan to boost household consumption to stimulate the economy, shifting away from long-term investment.

The plan has drawn a flurry of praise from some economists, as Chinese household spending is only 38% of its GDP, well below the global average of 68%. Meanwhile, 43% of China’s economy is driven by investment, about double the long-term US average of 22%.

“As reasonable as it is, consumption-led growth in Xi’s China is doomed to failure. governments and the national security bureaucracy, are taking root,” Liu and Steil said.

Beijing already appears to be reverting to its old playbook of driving growth, which will put China further indebted, they added.

Authorities have stepped in to support key sectors of its economy and are unlikely to depend on households to increase spending in those areas, Liu and Steil said.

Consumption-led growth is likely to upset key voters as well.

“After years of claiming credit for robust, nationwide, building-bloated urban growth, central government will not escape the wrath of unpaid city workers, the businesses that supply them, and the internet users that support them on social media. social media,” Liu and Steil said. .

Experts have warned of problems for China’s economy as it sees a disappointing economic rebound so far. The idea that the country would see a reopening boom has been a charade, an expert has said. Investors, meanwhile, withdrew their money from China at a faster rate as they lost faith in its grand economic reopening.

Read the original article on Business Insider

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