[20th CPC National Congress③] "The Growth Engine Has Cooled Down"... Challenges Remaining After the 'Coronation'

Growth Rate in China Expected to Remain in the 3% Range This Year
Concerns Over Long-Term Growth Slowdown Due to Aging Population
Talent Attraction Challenges Anticipated Post Zero-COVID Policy

[Asia Economy Beijing=Special Correspondent Kim Hyun-jung] Although Chinese President Xi Jinping has opened the door to long-term rule with a third term, numerous challenges lie ahead that must be resolved. The biggest issue is the economy. Due to nearly three years of strict COVID-19 containment measures since the outbreak, the economic engine has lost momentum, and macro-level difficulties such as aging population, low birth rates, and worsening inequality are expected. Once noted as a dark horse racing to surpass the United States, China now risks losing its position as the growth leader even within the Asian region.

◆Losing the 'Regional Growth Leader' Position for the First Time in 32 Years= According to Chinese financial information firm Wind, economists forecast that China's real GDP in the third quarter will grow by 3.5% compared to the same period last year. This is a rebound from the second quarter's 0.4%, the lowest since the COVID-19 outbreak in 2020, but it falls significantly short of experts' August forecast of 4.8%. The annual growth rate for this year is expected to be 3.6%, below the government's original target of 5.5%. To stimulate the economy in the third quarter, the Chinese government introduced various measures such as real estate stabilization policies, tax payment deferrals, and expanded lending, but persistent zero-COVID policies, inflation, and power shortages caused by droughts and heatwaves have even dampened exports.

China's long-held position as the 'growth engine' in the Asian region is also under threat. According to a report released last month by the World Bank (WB), China's economic growth rate this year is projected at 2.8%, falling short of the average 5.3% growth of the other 22 developing countries. This would mark the first time in 32 years, since 1990, that China has lagged behind other countries in the region in terms of growth rate.

Another problem is the lack of an exit strategy for the zero-COVID policy, which has poured cold water on the economic engine. Most experts predict that the pressure of epidemic control will not ease until the National People's Congress, the largest political event, in March next year. Moreover, there are no clear signs to expect improvement after March.

[Image source=Yonhap News]

◆Aging China... Overseas Talent Attraction 'Completely Stopped'= President Xi must also address China's structural problems that are festering internally. Like South Korea, China is rapidly becoming an aging society. Last year, China's births numbered 10.62 million, the lowest in 60 years since 1961, while the population aged 65 and over exceeded 200 million. Despite the government's shift toward pro-natalist policies, the population structure shows little change due to COVID-19 lockdowns and the lingering effects of traditional birth control policies. It is expected that next year China will lose its status as the most populous country to India. The population is projected to decrease by 200,000 this year alone, and some forecasts suggest the population could be halved by 2100. Rising wages and slowing consumption due to a shrinking labor force will hamper the previously fast-growing Chinese economy. The burden of various social insurance and pension expenditures for the elderly will also negatively impact the country's fiscal capacity.

The fact that China can no longer expand its talent pool, which once absorbed high-level professionals without restraint, is also cited as a crisis factor. At the end of last year, President Xi vowed to mobilize all means to recruit experts worldwide, but due to worsening US-China relations, strict zero-COVID policies, and inconvenient immigration procedures, China's talent attraction activities have effectively come to a halt. On the 13th, Hong Kong's South China Morning Post (SCMP) explained, "China's control measures are blocking foreign talents from accessing the 'world's second-largest economy,'" while "other Asian countries such as Taiwan and Singapore are intensifying efforts to attract global talent." SCMP cited a recent paper published in the Intereconomics Journal by Frank Wickenbach, a researcher at the Kiel Institute for the World Economy's International Trade and Investment Research Center, reporting that the number of foreigners residing in China is expected to continue declining. Wickenbach diagnosed, "The human separation triggered by travel restrictions and the decrease in foreigners in China could become another amplifier of the general economic and technological decoupling trend between China and the West."

Additionally, there are concerns that public dissatisfaction could erupt at any time against a long-term ruler who has broken existing conventions. In fact, videos and photos of two banners hung on an overpass in Haidian District, Beijing, rapidly circulated on Twitter the previous afternoon. According to CNN, the banners contained slogans such as "We want food, not nucleic acid tests; freedom, not lockdowns," expressing opposition to the zero-COVID policy, along with "We want votes, not orders; to be citizens, not slaves." Foreign media interpreted the unusual protest in the heart of Beijing as evidence that dissatisfaction and anger toward control and the one-person leadership system are accumulating within China.

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