Recent Macroeconomic Developments and Mid-run Outlook in China
Recent Macroeconomic Developments and Mid-run Outlook in China

Summary/Abstract: China has been the star of the world economy over the past decades, following the Opening Up policy implemented at the end of the 1970s – an evolution supported by the unprecedentedly fast pace of structural reforms and integration into the global economy. China’s share of the global economy rose from less than 2% in the 1980s to over 18% in 2021. The annual GDP growth rate began a normalization process after the outbreak of the Great Financial Crisis, the worst economic and financial crisis in the world since the Second World War, as China’s economy entered a maturity phase. Furthermore, the health restrictions implemented during the COVID-19 pandemic led to a slowdown in the growth rate. In this context, the annual growth rate of the Chinese economy decelerated during the post-pandemic cycle compared to developments in the post-crisis cycle. For instance, in the first half of 2024, GDP increased at an annual rate of 5%, while fixed investments grew at an annual rate of only 3.9% due to challenges in the real estate sector. In this paper, standard econometric tools are applied, and data from the International Monetary Fund (IMF) is used to estimate the annual dynamics of China’s potential output during the period 1980–2023. According to the results, the annual GDP growth rate of China is currently below 5%, and improving this indicator depends on accelerating structural reforms in the future, as recently signaled by the administration.

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