China has suffered one its worst economic performances in three decades, sparking fears of a global recession.
The world’s second largest economy struggled under the weight of a failing property market and weak consumption in 2023. It grew by just 5.2 percent in 2023.
While this was an improvement from the previous year, other than this it was the worst performance since the recession in 1990. The situation “remains shaky”, analysts have said, as in 2023, China accounted for nearly 19 percent of global GDP (PPP) – a huge portion compared to the US’ 15 percent.
Due to their inordinate shares, either country slowing could bring about a global recession.
A China-centered spiraling cascade through the international supply chain could again spur a global surge of inflation.
“The recovery clearly remains shaky,” analysts at Capital Economics wrote in a note. “While we still anticipate some near-term boost from policy easing, this is unlikely to prevent a renewed slowdown later this year.”
“Although the government met its 2023 GDP growth target of ‘around 5.0 percent’, achieving the same pace of expansion in 2024 will prove a lot more challenging,” they added.
Alfredo Montufar-Helu, head of the China Center for Economics and Business at the Conference Board, said: “There are two key drivers behind this: the unexpected, but short-lived release of pent-up demand during the [third quarter] holidays, and the low base effect of [fourth quarter] 2022.”
He was also not optimistic about the future of China’s economy, prediciting its growth will decelerate to 4.1 percent in 2024 due to subdued consumption and the ongoing property downturn.
It comes as the country reported a record low birth rate in 2023, its population shrinking for the second year in a row.
The country recorded 6.39 births per 1,000 people, down from 6.77 a year earlier, China’s National Bureau of Statistics (NBS) announced Wednesday. The birth rate is the lowest since the founding of Communist China in 1949.
Some 9.02 million babies were born, compared with 9.56 million babies in 2022. The overall population fell in 2023 to 1.409 billion, down 2.08 million people from the previous year, the bureau said.
Larry Hu, chief China economist for Macquarie Group, said: “To be sure, last year’s sharp decline should be partly due to the lockdowns and most likely new births will rebound in 2024, although the structural down-trend remains unchanged.”
Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations (CFR) in New York, said: “There are fewer people getting married and fewer couples want to have children.”
Chinese stocks fell following the release of both the economic data and fall in birth rate. Hong Kong’s Hang Seng Index closed down 3.7 percent. Meanwhile, the CSI300, which consists of 300 major stocks listed in Shanghai and Shenzhen, fell 2.2 percent. Both indexes fell over 10 percent last year.
However despite its falling birth rate, the population over this over 60 continues to expand. More than one-fifth of the population – nearly 297 million people – are now in that bracket.
Last week the State Council, China’s top administrative body, released guidelines to strengthen goods and services for the over-60s, or the so-called “silver economy”.
The guidelines ask companies across sectors including housing, health care and finance to tailor services and products for the elderly.
