The True State of the Chinese Economy

03.30.2021 | Articles | Chen Bing-Ming

INTRODUCTION

The Chinese economy is able to maintain a certain level of growth. From the second half of this year [2020] through next year, the trend will be obvious. But over the years, as chronic issues take their toll in the wake of the pandemic, this growth will look insignificant. While GDP started to show growth in the second half of the year, more precise economic indicators such as Total Factor Productivity [TFP] show a decline in growth from 2013 onwards, calling into question whether official GDP growth will measurably improve the standard of living. Post-pandemic, in order to protect economic growth and basic government operations, all levels of the government will reinforce the model of government-led economic growth. This low-productivity growth model will further contribute to the economy’s structural imbalance. At the same time, the ruling party will further consolidate power. Against the backdrop of this “inner cycle,” all levels of government will increase support for state-owned enterprises (SOEs), and SOEs will take over even more of the living space of the private economy; the piling on of multiple factors will further skew the already imbalanced economic structure, income distribution, and local government debt, and will have a fairly large impact on foreign exchange and employment. If left unchecked, these economic problems will evolve into social and political problems.