China’s Economic Pivot: From High-Speed to Sustainable Growth

July 31, 2023

China is undergoing a fundamental transition from high-speed growth into high-quality growth that is financially more sustainable. It means containing or reducing debt, pushing “common prosperity”, and being greener.’

‘The decades of volume growth in China are over. Stimulus measures aimed at lifting sales volume have had a marginal impact. Beijing isn’t willing to unleash a big stimulus, as it delays consolidation.’

‘China has overcapacity due to weak local and export demand. Producer prices could fall 5% this year and 5% next year. China is likely to export this deflation.’

China is shifting from its long-standing pattern of rapid growth to a focus on quality, sustainable development. This transition, driven by structural challenges like weak consumer spending, a housing market bubble, and falling export demand, seeks to create a more demand-driven economy with less dependence on debt. However, there are short-term obstacles, and a significant government stimulus is improbable due to existing oversupply issues. Instead, market consolidation and price adjustments are likely in the near future.

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