The economy is large enough to still create sufficient jobs at these growth rates, China's economists say.
China’s biggest trouble might seem to be a trade war with the US, but the gigantic hidden debt pile could hurt the Chinese economy more than anything else. China’s government is sitting on a ballooning hidden debt pile of up to $6 trillion, according to S&P Global research. These borrowings are reportedly made by the local governments for infrastructure development. The debt of this magnitude imparts severe credit risk when unveiled. The S&P report came a few months back when the trade war was gaining momentum. Given the sheer size of the off-balance-sheet debt, China probably needs a decade or more to address it, S&P mentioned.
By the end of 2017, China’s outstanding government debt on balance sheets totaled 29.95 trillion yuan. This makes the ratio of government debt to GDP, including hidden debts, to reach an alarming level of 60 per cent in 2017, the rating agency said. This coupled with the decline in exports and overall trade has made China’s economy lose its pace of growth.
Meanwhile, China’s GDP growth slowed down to 6 per cent, the slowest pace since 1992. However, a few think tanks do not worry about the slowing advancement of China’s GDP. “A 6 per cent growth rate is enough to absorb the new labour supply. When China’s economic size grows to 100 trillion yuan (US$14 trillion) or 110 trillion yuan, a growth rate of 5 or 4 per cent will be enough, so what’s the point of aiming for an overly high growth rate?” Zhang Yuxian, the head of the economic forecasting division at the State Information Centre, a think tank under the Chinese government’s economic planning agency, told the South China Morning Post.
The government economists in China also say that the country can handle much lower GDP growth. “The economy is large enough to still create sufficient jobs at these growth rates”, three prominent Chinese economists who advise the government told SCMP.