Ho-fung Hung in Dissent:
The China boom has ended. The country’s annual economic growth rate has decelerated from a height of more than 14 percent in 2007 to less than 6 percent in 2023. Total indebtedness (including both internal and external debt) surpassed an alarming 365 percent of GDP as of the first quarter of 2024, according to the Institute of International Finance—much higher than comparable middle-income countries like Brazil (208 percent), Argentina (152 percent), and Indonesia (86 percent). The collapse or near collapse of real estate giants like Evergrande, which just a few years ago was the poster child for China’s economic miracle, is just one example of the country’s economic difficulties.
Over the last three decades, China has experienced multiple economic crises driven by domestic imbalances or external shocks, including overheating in 1992–93, deflation in the aftermath of the 1997–98 Asian financial crisis, and fallout from the global financial crisis of 2008. Each time, the Chinese economy turned around swiftly thanks to decisive policy adjustments (Zhu Rongji’s reforms in 1994), new openings to trade (the 2001 accession to the WTO), and aggressive financial stimulus (the 2009–10 state-driven investment spree). These past successes have led many China watchers to assume the Chinese government can repeat the magic and rejuvenate the economy once again. But China’s current economic crisis has resulted from a long and deep structural imbalance that will be much more difficult to resolve.
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