Why China’s economy will continue to grow

China’s economy sees a resurgence in the third quarter, beating forecasts

The equity value – assets minus liabilities – of China’s state-owned assets represents a greater percentage of its GDP than all government debt. This does not even count the value of its vast land resources. Therefore, China has plenty room to expand fiscal policy.

This pattern reflects the deepening of China’s manufacturing as it moves towards higher-end products and becomes even more embedded in the global supply chain. In 2019, China’s added value to iPhones represented only about 4 per cent of their retail value. That has climbed to 25 per cent.

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China does face economic challenges. Business and consumer sentiment is weak, and confidence is low. The economy is underperforming. It will take a few years of policy stability and support for the private sector to fully regain confidence. But China’s economic fundamentals are sound, its government has substantial policy space and its industrial development has positioned it well for the future. Therefore, China’s growth will continue in the foreseeable future.

Weijian Shan, whose books include Out of the Gobi, Money Games, and Money Machine, is chairman and CEO of PAG, a leading Asia-focused private equity firm. This article is adapted from a speech at PAG’s 2023 Investor Conference on November 8

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“Concerns are centered on the property market, where activity has been excessive since the government rolled out stimulus measures in 2008,” said World Bank economist Ardo Hansson. The number of newly constructed housing units as a percentage of the number of households in China is already much higher than it had been in Japan or the United States at any point in their history. The average property price-to-income ratio is already about 10 across China and more than 15 in the larger cities. In comparison, the U.S. housing bubble peaked with this ratio at six.

China will only continue to grow robustly if it makes the transition from an export-dependent economy to one driven by domestic consumption and investment, coupled with key reforms, including better health care and pension systems and allowing the yuan to strengthen,” said Peter Navarro, professor of economics and public policy at the University of California, Irvine, and co-author of Death by China.

 International Monetary Fund

a sharp, sustained increase in productivity (that is, increased worker efficiency) was the driving force behind the economic boom. During 1979-94 productivity gains accounted for more than 42 percent of China’s growth and by the early 1990s had overtaken capital as the most significant source of that growth. This marks a departure from the traditional view of development in which capital investment takes the lead. This jump in productivity originated in the economic reforms begun in 1978.

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Source: South China Morning Post economy the fundamentals of Chinas economy adapt policies industrial development will see it through property sector downturn demographic headwinds CHINA ASIA

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