The Bank of Korea Forecasts China's Potential Growth Rate at 2.9% for 2031-2035

Bank of Korea Research Department China Economy Team & International Department International Finance Research Team
Presentation on 'Assessment of Structural Risk Factors Constraining China's Medium- to Long-Term Growth'

[Asia Economy Reporter Jang Sehee] An analysis has emerged predicting that China's potential growth rate will be 2.9% in 2035. The potential growth rate refers to the projected growth rate a country can achieve by mobilizing all production factors it possesses, such as capital, labor, and resources, without stimulating inflation.

On the 12th, the Bank of Korea stated in its 'Overseas Economic Focus' report that "China's economy may enter a phase of growth stagnation, falling into the middle-income trap, with growth persistently below the potential level." It forecasted that China's growth rate from 2031 to 2035 will be 1.9%, below the potential growth rate of 2.9%.

The Bank of Korea analyzed growth trajectories under neutral, optimistic, and pessimistic scenarios.

First, if China smoothly resolves structural risks such as excessive debt, US-China conflicts, and productivity slowdown, it is expected to grow by 5.4% during 2021?2025. This figure exceeds the potential growth rate of 5.0%. It also projected a 4.5% growth rate for 2031?2035.

Under the neutral growth path, orderly deleveraging and the pursuit of common prosperity will cause structural shocks that affect growth in the short term, continuing the trend of growth slowdown. Accordingly, it forecasted 4.8% growth for 2021?2025. For 2026?2030 and 2031?2035, it projected growth rates of 3.7% and 2.9%, respectively.

In the pessimistic scenario, growth is expected to remain persistently below the potential level. It predicted 2.6% growth for 2021?2025 and 2.8% growth for 2026?2030.

Meanwhile, the Bank of Korea emphasized that "the global competitiveness of manufacturing and investment in advanced technologies will prevent a sharp decline in the growth slowdown trend," and stressed that "South Korea also needs to diversify export markets and secure competitiveness in the Chinese domestic market."

This content was produced with the assistance of AI translation services.