The World Bank has revised its growth forecast for China in 2024 to 4.4%, down from the 4.8% it predicted in April, due to a series of weak economic indicators, according to a report by the Financial Times on Monday. This marks a significant decrease from China’s own growth target of about 5% set for 2023, reflecting mounting concerns over the nation’s economic slowdown and its potential ripple effects across Asia.
Key weaknesses in China’s economy cited by the World Bank include plummeting retail sales, stagnant house prices, and increasing household debt. The bank also highlighted lackluster private sector investment as a contributing factor to the economic downturn.
In addition to China’s revised growth forecast, the World Bank also lowered its projection for gross domestic product (GDP) growth for developing economies in East Asia and the Pacific in 2024. The new estimate is 4.5%, down from an April prediction of 4.8%, marking one of the slowest paces of growth for this region since the late 1960s, barring extraordinary events such as the coronavirus pandemic, Asian financial crisis, and global oil shocks of the 1970s.
Aaditya Mattoo, World Bank chief economist for East Asia and the Pacific, noted that expectations for China’s recovery from strict pandemic controls were more optimistic than actual outcomes. He suggested that governments, including China’s, should embark on “deeper” service sector reforms to spur growth and harness the digital revolution.
Trade tensions between China and the United States have also been identified as a significant factor contributing to economic decline in East Asia. While Southeast Asian countries initially benefited from US-China trade tensions as demand was redirected towards them, particularly Vietnam, this trend has reversed with recent US industrial and trade policies such as the Inflation Reduction Act and the Chips and Science Act.
These policies, designed to boost US manufacturing and reduce American dependence on China, have adversely impacted Southeast Asian countries. Their exports of affected products to the US have fallen, and rising household, corporate, and government debt has further dented growth prospects in the region.
The World Bank’s revised forecasts underscore that much of East Asia, not just China, is grappling with the new US industrial and trade policies. This development has led to concerns from Southeast Asian nations, such as Indonesia and Vietnam, who are seeking fair treatment in trade relations, particularly in relation to green technology subsidies and electric vehicle tax credit benefits.
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