Recent reports by the World Bank and the International Monetary Fund have weakened the strength of the Chinese economy, while the Indian economy has been lauded as the “star performer” on the global stage.
The World Bank report on December 14, describing the recovery of the Chinese economy from the pandemic as “fragile,” predicted a sharp slowdown in 2024.
In 2024, the annual growth rate of the Chinese economy is expected to decrease from 5.2 percent in 2023 to 4.5 percent. China faces challenges in the property sector and declining global demand for its exports, leading to a high debt ratio and wavering consumer confidence.
The temporary recovery driven by recent investments in factories and construction, along with growing demand for services, is anticipated to fade in the coming years.
According to the World Bank, the growth rate of the Chinese economy is projected to be around 5 percent in 2023, but economists forecast a decline in the following months due to various negative factors.
The International Monetary Fund (IMF) identified reasons for China’s falling growth rate in its 2023 Article IV titled ‘Mission to China,’ citing the negative effects of aging, diminishing returns on investment, and geo-economic fragmentation.
The World Bank estimates that the growth rate will further drop to 4.3 percent in 2025, down from 4.5 percent in 2024, signaling the end of China’s double-digit growth witnessed in the past two decades.
Statistics reveal significant fluctuations in the Chinese economy’s growth rate in recent years, ranging from 2.2 percent in 2020 to 8.4 percent in 2021 and three percent in 2022.
The pandemic’s impact, coupled with restrictions on technology transfer and a downturn in the real estate sector, has led to job losses and a reduction in consumer spending.
The World Bank report highlighted that most post-pandemic jobs in China have been low-skilled positions in the service industry, contributing to low pay.
President Xi’s visits to San Francisco and Shanghai aimed to reassure foreign investors, addressing concerns from intellectual property theft to data security.
Despite being labeled as a communist country, China’s social safety net is considered inadequate, further diminishing consumer confidence.
Additionally, an aging population places a heavier burden on younger generations to support elders.
The International Monetary Fund (IMF) identified reasons for China’s falling growth rate in its 2023 Article IV titled ‘Mission to China,’ citing the negative effects of aging, diminishing returns on investment, and geo-economic fragmentation.
The IMF recommended broad-based and pro-market structural reforms for boosting productivity, potentially conflicting with President Xi Jinping’s push towards classical communism.
In contrast, the IMF applauded India’s economic performance in its report, labeling it a ‘star performer’ contributing to 16 percent of global growth.
The IMF credited India’s digital public infrastructure, strong government support, and near-term fiscal policies for the sustained growth, projecting a 6.3 percent growth in the fiscal year 2023-24.
Both the IMF and the World Bank acknowledged India’s remarkable economic recovery, surpassing that of China. Global giants are increasingly turning to India as their manufacturing hub, exemplified by Apple assembling the iPhone 15 and Foxconn partnering with Vedanta to produce semiconductors in India.
Recent attempts by President Xi to improve relations with the U.S. and attract American investments reflect Beijing’s concern about the declining Chinese economy and the potential surpassing of India.
President Xi’s visits to San Francisco and Shanghai aimed to reassure foreign investors, addressing concerns from intellectual property theft to data security.
The move signifies the failure of Xi’s policy to revert China to classical communism, as economic challenges persist.
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