The Bank of Finland Institute for Emerging Economies (BOFIT) expects China’s GDP growth to reach around 6% this year due to the opening-up of the economy and last year’s low reference basis.
Recovery of the real estate sector should also help increase GDP growth next year to 4 %. After that, BOFIT sees growth slow to around 3%. This modest overall growth figure naturally allows for higher growth in certain parts of the economy.
Even a modest recovery is sufficient for GDP growth to overcome this year’s official target, which is “about 5 %”. Much of this achievement is made possible by last year’s low reference basis, which was revised even lower this year.
The risks limiting long-term growth remain in place, BOFIT says. China’s labor force is shrinking, the population is aging, political guidance has increased and indebtedness restrains corporate profitability, and investment plans. Real estate investments are not likely to remain such a strong support to economic growth as they have been in the past, and most of the people’s wealth is tied up in housing which has now become a far less reliable investment. This could hinder consumer demand.
Global demand is still clouded by the ongoing rise in living costs and interest rates. In such circumstances, China’s export sector can hardly be the growth engine that it was in 2020–2021, BOFIT predicts.
Domestic inflation has been clearly below China’s official 3% ceiling, and it’s expected to remain modest for the time being.
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