China experienced spectacular growth in the last 30 years. However, the next 30 years will be very different due to a confluence of many factors. Peak migration, unsustainable debt, and demographic challenges will hobble China’s growth in the future. The average annual GDP growth rate will be about 4% this decade … if there are no financial crises.
China’s total debt is three times as large as its GDP — without including the infamous and opaque shadow banking. Many large corporate conglomerates – including state-owned enterprises – have gone bankrupt in the last two years, had to be bailed out, or they are teetering on the edge. Evergrande, HNA group, Anbang insurance, Huarong bank, Suning, and Wanda are notable examples of mega-corporations whose debt-fueled growth ended disastrously. Chinese household debts have also more than tripled in the last eight years. The systemic risks in China’s economy are very real.
Aging population, shrinking labor force, widening inequality, exorbitant cost of living, low fertility rate etc. will greatly impact China’s economic growth and financial situation.
China needs to make radical changes to its domestic and foreign policies to bolster its economy.