China’s GDP Declines to 3%, to Cause Ripple Effect Across the World
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Vice-premier, Liu He of the People’s Republic of China, spoke at the World Economic Forum at Davos 2023 about China’s weakened economy. As per the NBS (National Bureau of Statistics), the nation’s GDP went down to 3%, while China had targeted at least 5.5% for 2022. But the economic slowdown is going to create a ripple effect across the world, and other countries may also bear some of its effects because of the trade, and other repercussions. China is finding it hard to sustain a higher growth rate, which used to happen in the late 1980s and up to the 1990s. The rates are not even close to 10% for the sectors.
Probably, the economy is slipping into the middle-income trap. Productivity has taken declined greatly, slowing the Chinese economic growth to 2.3%, like that of the year 1974. The nation could not even meet the USD 18 trillion or 4.4% growth rate for GDP in 2021, as predicted by the IMF as the dollar rose against RMB. The Covid-19 pandemic has shaken the roots of China’s growth chapter. In 2022, the nation saw a sharp decline in its GDP growth because of its Zero Covid policy leading to a series of lockdowns, followed by the real estate crisis and big industrial firms facing the Communist Party’s wrath.
With an industrial output standing at just 3.6% only year after year and at 1.3% in December, the manufacturing hub tag is down to shambles. The Chinese businesses and their curbed production have slowed down the economy for several sectors. The ferrous metal smelting and pressing industry had the worst fall at 94.5%, signifying a 92.7% decline for the first time in 10 months. Also, for the other 41 industrial sectors, the profits came down for 21 of these.
Western sanctions, especially from the United States for the breach of data security and stealing of patents, have also affected Chinese firms. Earlier, the infrastructure investments had kept the nation’s economy going as new factories came up, and the roads and housing facilities improved. But the same cannot be attributed to structural innovation and reform.
