Despite gloomy economic forecasts, the United States has outpaced China in terms of a recovery from the crisis. According to Bloomberg analysts, the Chinese economy is being weighed down by the COVID-19 pandemic and the rigid top-down approach established under President Xi Jinping.
The economic recovery from the pandemic in the United States has been more successful than that in China. Such a result has puzzled experts, thus questioning Beijing's prospects for leadership in the global market. Earlier, the country claimed to be the world's largest economy, competing with the United States. However, the latter has once again surpassed China.
In 2023, US gross domestic product rose by 6.3% in nominal terms, outstriping China's 4.6% gain. Also, the situation in the US stock market is much more favorable than in the Chinese one. Wall Street's main indices are breaking records, while China's equities are diving to multi-year lows.
Based on recent data, experts are confident that it is almost impossible to reverse this situation and the headwinds China is facing will only intensify in the near future. They warn of a multi-year cyclical decline, the so-called "century-long stagnation" caused by a top-down governance model adopted by the national leader.
According to Adam Posen, president of the Peterson Institute for International Economics, Xi Jinping's consolidation of power is forcing small businesses and households to adopt an accumulative model of behavior. In this context, China cannot rely on the domestic market and is experiencing a decline in investment activity.
Earlier, Beijing reportedly created a special stabilization fund to shore up confidence in its stock markets, with funds to be drawn from the accounts of state-owned enterprises.
The Chinese authorities are struggling against a years-long real estate bust, which in turn pushes the country deeper into its worst deflation in 25 years. This comes with declining exports and spiraling youth unemployment. China’s economic growth is also hampered by trillions of dollars in debt owed by local governments that is difficult to service.
That is why the economy is in the doldrums. According to Former Treasury Secretary Lawrence Summers, excess savings, deflation, and financial market bubbles used to be considered Western problems. Now they are all falling on the East, the official added.
