The dragon for rest of us -- China, which challenged the US-dominated world order with a prodigious 15% GDP growth rate at one point in 1993 and by posting an average of over 9% for almost three decades, is slowing down. And is getting old.
The dragon for rest of us — China, which challenged the US-dominated world order with a prodigious 15% GDP growth rate at one point in 1993 and by posting an average of over 9% for almost three decades, is slowing down.
China’s Gross Domestic Product (GDP) grew at 6.8% in the first half of the calendar year 2018, to about $6.27 trillion, data the country’s statistics bureau showed. In fact, China’s GDP growth has stayed within the range of 6.7% to 6.9% for 12 quarters in a row now, paving the way for India to become the fastest growing emerging economy.
And not only is the dragon is slowing down, it is also getting old. China’s ‘One Child’ policy started in 1979 to contain its exploding population was a decade later followed by the fast economic growth. But that came at a price.
Due to China’s stringent family planning policy, the country is now on the brink of becoming an ageing economy, with a median age of 37 years. “China will get old before it fully succeeds in getting rich,” said a Deloitte report, adding that this trend can have inflationary ripple effects that can be felt around the world.
Japan is the oldest country in the world with the median age of 47.1 years, GDP growth rate of less than 1% but with a per capita income of about $42,000. China, on the other hand, has a per capita income of $15,500.
“The worst-case scenario would be if China followed Japan’s path, with declining growth, a worsening government budget deficit, and pressure on its property and financial markets,” the Deloitte report titled ‘Ageing Tigers, Hidden Dragons’ said.
“If so, the global implications would be massive, given that China’s population is ten times that of Japan, and given that China doesn’t yet have a sound social security system. And there’s a chance that ageing, particularly in China, could lead to higher inflation rates and higher interest rates around the world,” it added.
But the doomsday is in distant future: China, despite the slowdown, is the single largest contributor to the world GDP. “…unlike the major economies of the developed world, which constantly struggle with a tradeoff between short-term cyclical pressures and longer-term structural reforms, China is perfectly capable of addressing both sets of challenges simultaneously,” A Yale University paper said, adding that China has continued to remain the world’s major growth engine.