Can China navigate the storm?

While it has successfully weathered economic challenges before, this time is different

- JANAK RAJ

42 per cent over the past 50 years. This far outstrips the next highest savings rate among major EMEs, 31 per cent in Malaysia, and the global average of 22 per cent. Consequently, consumption in China has been low, at 53 per cent of GDP (2002), compared with 71 per cent in India and over 80 per cent in Brazil, Mexico, and South Africa (2023).

Investment in the property sector has become a key driver of growth, with its share in GDP rising from 16 per cent in 2011 to a peak of 29 per cent, before moderating to 24 per cent in 2023. The property sector, which stores 70 per cent of household wealth, has been experiencing a downturn, caused by high debt and rising defaults.

Excessively high savings and low consumption have become increasingly unsustainable, as factors such as the collapse of the property market have created a negative wealth effect and eroded consumer confidence. Although authorities indicated a shift toward rebalancing the economy after the 2008 NAFC, little has changed. The International Monetary Fund has urged authorities to implement structural reforms to strengthen the social safety net and boost household consumption.