China’s rulers seem resigned to a slowing economy

IN 2011, the American Economic Review published an influential article entitled “Growing Like China”. Its authors, including Zheng Song of the Chinese University of Hong Kong, tried to explain China’s distinctive pace and pattern of development. The title was as well received as the argument, echoed in a variety of papers such as “Innovating like China”, “Investing like China” and “Internationalising like China”.

This year, however, the country is not growing like China at all. Thanks to its deep property slump and the government’s zero-Covid policy, which entails lockdowns in response to every outbreak of the virus, the economy is now forecast to grow by less than 3 per cent in 2022, said banks such as Nomura, Morgan Stanley and UBS. That is far below the official target of 5.5 per cent.

China’s currency is also weakening. On Sep 16, it took more than 7 yuan (S$1.40) to buy a US dollar for the first time since July 2020. A gap has opened up between the gross domestic product (GDP) path envisaged for China at the start of this year and the grimmer one that now seems probable. China’s GDP in 2023 could be more than US$2 trillion below the level forecast in January, reckons Goldman Sachs.