China’s GDP expansion is currently underperforming that of the rest of Asia, presenting a significant challenge for the world’s second-largest economy. With a property crisis and high youth unemployment rates, China’s economic growth is expected to slow down compared to its Asian counterparts after experiencing decades of rapid development.
According to data compiled by HSBC in November 2024, the projected growth of per capita GDP for various Asian countries from 2023 to 2026 highlights the disparity in economic performance across the region. While countries like India and Southeast Asian nations are forecasted to achieve an average per capita GDP growth of 6.5% during this period, China lags behind with an anticipated growth rate of only 3.9%.
Factors contributing to the underperformance of the Chinese economy include a slowdown in foreign and domestic private investment, a stagnant technology sector, and challenges in boosting consumer demand. These obstacles have prompted top Chinese leaders to adopt a more aggressive approach to stimulate economic growth, potentially through measures such as interest rate cuts and increased government spending.
Robin Xing, the chief China economist at Morgan Stanley, has emphasized the need for the Chinese government to implement a comprehensive policy mix to revitalize the economy. Xing predicts a “long battle” ahead for the Communist Party as they strive to steer the economy back on track, with 2025 expected to be a challenging year of transition.
Looking ahead, Xing suggests that by 2026, China may have found the right balance of policies focusing on stimulating consumption and enhancing social safety nets. This shift in strategy could potentially lead to a more sustainable and inclusive economic growth trajectory for the country.
In contrast to China’s sluggish growth, other Asian economies like India, Vietnam, Singapore, Thailand, Malaysia, Indonesia, and the Philippines are forecasted to outperform with higher per capita GDP growth rates. Factors such as strong private and foreign investments, a burgeoning technology sector, a growing middle class, and favorable demographic trends are expected to propel the growth of these economies in the coming years.
The divergence in economic performance among Asian countries underscores the importance of implementing targeted policies to address specific challenges and capitalize on unique strengths. China’s ability to navigate through its current economic hurdles and implement effective stimulus measures will be critical in determining its future growth trajectory and competitiveness in the global economy.
As China works towards revitalizing its economy and fostering sustainable growth, it will be essential for policymakers to prioritize reforms that promote innovation, enhance productivity, and create opportunities for all segments of society. By embracing a holistic approach to economic development, China can overcome its current challenges and position itself as a leading player in the Asian and global economy in the years to come.
