In March, Chinese Premier Li Qiang set an ambitious economic growth target of 5% for 2024, a goal supported by former World Bank chief economist Justin Yifu Lin. Lin projected that China’s economy could expand at an average yearly rate of 5-6% over the next decade, slowing to 3-4% between 2036 and 2050. He suggested China might achieve high-income status by 2025 or 2026, despite challenges posed by its aging population.
Lin noted that historically, countries with aging populations have struggled to sustain high growth rates. China’s demographic shift, with those aged 65 and above surpassing 15.4% by 2023, poses significant economic challenges. This trend historically leads to slower GDP growth due to impacts on production, consumption, entrepreneurship, and innovation.
Comparing China’s situation to Japan and Germany, Lin highlighted how workforce contraction in those countries led to declines in GDP per capita. China’s demographic trajectory mirrors Japan’s in 1995 and Germany’s in 2000, suggesting a potential decline in growth rates to around 3% by 2028 and potentially below the U.S. rate by 2031-2035.
With China’s per capita GDP at $12,681 in 2023, below the World Bank’s high-income benchmark, achieving sustained growth faces additional challenges. Factors such as a devalued yuan, a shrinking workforce, and global shifts in industrial value chains further complicate China’s economic outlook.
Addressing these challenges requires significant reforms to increase household incomes and tackle demographic issues. However, China’s current stance on economic reforms suggests that achieving necessary changes may take considerable time.
Key Points:
- Ambitious Growth Target: China aims for 5% GDP growth in 2024, supported by Justin Yifu Lin’s projections.
- Aging Population Challenges: Demographic shifts impact economic vitality and growth potential.
- Comparative Analysis: Similarities to Japan and Germany’s economic challenges highlight potential growth rate declines.
- Income Disparity: China’s per capita GDP and disposable income below high-income benchmarks necessitate reforms for sustainable growth.
Navigating these complexities will be critical for China’s economic future amidst global uncertainties and internal demographic pressures.
