A financial professional, Chuck (Atsushi) Kawakami (pictured) reported whether China's high economic growth can be maintained. MIRUPLUS pick up his analysis as follows;
Most economic expectations for China are to grow in the 8% range this year. But can China's high growth be maintained? I'm very skeptical about whether GDP per capita, which has been controversial these days, can go well above $ 10,000, as the IMF expected.
First, the labor force has peaked and the substance has shrunk, which is becoming a reality. The increase in the working-age population (Above 15 to 65 years old) is almost zero even in 2020, according to the UN forecast, and will reach a negative level of 2-3% annually toward 2030. By the way, the peak working-age population in China was 995.7 million in 2015.
The transition of the working-age population in comparison with Japan based on the UN forecast is like chasing Japan for 20 years.
Looking at the growth rate of GDP, there is no doubt that it is on a downward trend.
Including the above factors, there is a point that China may be reducing its growth potential as a middle advanced country at an early stage.
Originally, consumption is not very strong. Automobile sales, retail sales, housing prices, consumer prices, etc. are generally on a slowdown trend.
Even if car sales seem to be strong year-on-year, the reactionary increase that fell in the previous year may be larger, but although sales in February, of which the Chinese New Year are sluggish every year, it was only 1.16 million units in 2021, which is lower than the past lowest price of about 1.22 million units in 2019 since 2016, and sales are not strong.
Fixed asset investment figures remain important in China's published indicators. The data needs to be processed in various ways, and if the past data is used as it is, it is a data series with question marks due to the balance of numbers such as GDP, but it will be necessary to see the trend of changes. The graph clearly shows that the trend of fixed asset investment is slowing down more than GDP.
In particular, the growth rate of the "private sector" has slowed significantly in 2019. It is clear that the unstable period after Chinese Black Monday in August 2015 is supported by public investment, and the same is true during this corona pandemic era. The poor investment in fixed assets in the “private sector” is thought to be due to the heavy weight of debt.
Regarding the debt issue, the debt-to-GDP ratio of Chinese non-financial companies was 163.1% at the end of September 2020, which is larger than the bubble period in Japan, and it is highly possible that the consolidation is dampening the vitality of the economy.
It has been pointed out that the number of companies such as bankruptcies is increasing. Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said that non-performing assets in 2021 will increase from USD 466.9 billion in 2020. It is expected to increase to. The consolidation of excess debt by Chinese companies will continue to work negatively on the economy.
Isn't it the political ups and downs of Jack Ma and Alibaba that symbolically manifested an event that would change the corporate mindset? The situation in which a large successful person loses his or her position or property very easily through political intervention will greatly undermine the mindset of entrepreneurs who take various business risks and make advanced attempts.
In the current system of China, success is scooped up by politics, so in the digital age, the leaders to secure the cutting edge that must take risks and win are free to worry about politics. If the degree is restricted, the vitality for development against the United States will be automatically reduced. I think this problem is very big.
Entrepreneurs may have realized that over time they can't win-win with the current administration.
In any case, I think China's growth needs to be vigilant, apart from the current optimism.
Chuck (Atsushi) Kawakami
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