Chinese growth: a leader with (too) great ambitions?

The coming year is the subject of short-term predictions. The Chinese, on the other hand, have a longer term vision. They make statements about the trajectory of their country decades in advance. In 1978, then-leader Deng Xiaoping declared that China would strive to quadruple its GDP per person in the last twenty years of the 20th century.^e century, before multiplying it again by four during the first thirty to fifty years of the XXI^e century.

In November 2020, Xi Jinping said that it was “quite possible” for China to double its GDP between 2020 and 2035. If confirmed, then China could overtake the United States and become the world’s largest economy. world somewhere in the middle of the next decade. This prospect worries many Americans. These projections are also reckless because they could turn out to be totally wrong – even when made by powerful leaders in a position to influence the course of events.

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Deng himself had scathing remarks about how, in 1961, Nikita Khrushchev had boasted that by 1980, “according to scientific calculations”, the Soviet Union would have essentially completed the construction of the communism, providing its population with a standard of living far surpassing that enjoyed by American workers. Forecasts of a tripling of milk production and a quadrupling of meat production were even printed on stamps!

The failure of the zero Covid policy

Will China’s leaders look this ridiculous? When Xi Jinping gave his speech in 2020, the Chinese real estate market was booming and the policy of nipping any outbreak of Covid contamination in the bud was working relatively well. This is far from being the case today. The appearance of more infectious variants has made the zero Covid policy less effective and more costly, even forcing the authorities to abandon it at the start of 2023. The country has since suffered a wave of contaminations which overwhelms its hospitals and could cause havoc in a vulnerable elderly population. The president’s reluctance to deploy Western-designed vaccines (which are more effective than Chinese) has done more to stem China’s rise than any tariffs or controls instituted by American hawks.

Hostage to its senior citizens, China has also become dangerously dependent on its real estate sector. It sold more than 1.56 billion square meters of housing in 2021, which is equivalent to selling twelve times all the apartments in Manhattan in a single year. Many economists believe that this figure will never be equaled again.

The failure of giant promoter Evergrande at the end of that year was an early symptom of the looming crisis. In 2022, financial problems facing developers have hampered construction and caused unease among buyers. Sales fell 27% in the first half of 2022 compared to the same period of 2021. Even if buyer confidence can be restored, their number will decline over the next decade due to the slowdown in urbanization and the peak demographic.

When is the Chinese sorpasso?

The deceleration of Chinese growth and the acceleration of its demographic decline raise doubts about its economic future. These trends have pushed back the date when China is expected to become the world’s largest economy. Some even think now that this day will never come. When Nikita Khrushchev announced that his generation of Soviet citizens would soon be living in fully realized communism, one speechwriter quipped that this slogan would “survive for centuries.” The Soviets were twenty years away from Utopia and would remain so forever. A similar feeling is expressed today with regard to China: it is ten or fifteen years away from catching up with the United States, but it will always remain so. If China doesn’t achieve this feat before the early 2030s, it never will, says consultancy firm Capital Economics.

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In one scenario, China’s GDP could overtake US in the early 2030s, proving Chinese optimists right, but would soon fall behind as China’s labor force contracts, proving pessimists right. . Mark Williams of Capital Economics compares this scenario to the temporary overtaking of Great Britain by Italy in 1987, an episode known as the sorpasso. An “ephemeral sorpasso from China would be the most satisfying outcome,” he jokes.

Even if China failed to achieve its goals, Deng Xiaoping probably wouldn’t have been too disappointed. After having quadrupled its GDP per capita twice by 2030-2050, China would become, he thought, a “relatively developed” country with a GDP per capita of 4,000 dollars at the value of the dollar in 1980, i.e. 11,200 current dollars. China surpassed this level in 2021, well ahead of expectations. Compared to this spectacular reality, Deng’s projection turned out to be extremely timid. “We don’t get drunk on words,” he said in 1987. Since then, China has been getting drunk on growth.

Simon Cox, China journalist for The Economist