China’s economy will be ‘far less prosperous’ in coming years as headwinds intensify, Australian think tank says

Becoming the world’s largest economy is still on the cards for China, according to the Lowy Institute, but vastly surpassing the United States is out of the question

Report stands in stark contrast to more bullish outlooks by some Chinese economists, but even they contend that demographic challenges and external threats pose outsized threats

Reading Time:3 minutes

China’s ability to rely on infrastructure projects is reaching its limit in driving economic growth, according to the Lowy Institute. Photo: AFP

Published: 4:30am, 17 Mar 2022Updated: 5:40am, 17 Mar 2022

China’s economy will “never enjoy a meaningful lead” over the United States and will remain far less prosperous and productive per person even by the mid-century point, though it will still become the world’s largest economy, according to a new report.

The Sydney-based think tank Lowy Institute predicts that China’s economic growth will slow sharply to roughly 3 per cent a year by 2030, and will average 2 to 3 per cent per year on average from now until 2050.

“Substantial long-term growth deceleration is the likely future for China, given the legacy effects of its uniquely draconian past population policies, reliance on investment-driven growth and slowing productivity growth,” said Roland Rajah, the lead economist at the Lowy Institute and co-author of the report.

The report stands in stark contrast to more bullish outlooks, including by former World Bank vice-president Justin Lin Yifu, who said earlier this month that China will become the world’s top economy by 2030. The senior Beijing adviser is also known for his strong belief that China could maintain an average annual growth rate of 8 per cent until 2035.

Lin, who holds a doctorate in economics from the University of Chicago, added that the ongoing Ukraine war will not halt China’s push to surpass the United States.

China achieved better-than-expected economic growth for 2021, with its gross domestic product (GDP) of 8.1 per cent beating most expectations, including the central government’s target of “above 6 per cent”.

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x