IMF calls for reforms of China’s Growth model
The International Monetary Fund says that the potential growth of China is falling. The country is in need of comprehensive economic reforms. The international organization has made this call because Chinese investments are diminishing. Also, the growth model of china completely depends on State–owned enterprises. Unfortunately, the state-owned enterprises in the country are very less in number. This makes the economic growth over–reliant on less supportive state-owned enterprises.
What is the issue?
The Chinese GDP is falling since COVID. According to the IMF, the growth of China is to be around 5.2% in 2023. China was on the plan of doubling its GDP. At the current pace and with growth rates falling down, China will not be able to achieve this target. In 2005-06, the growth rate of China was 10%. In 2021, it was 4.7%. It will drop further in four to five years.
Why is China facing this issue?
The issue arose because the working population of China is decreasing. To control population growth, the country introduced the One Child policy. With advancements, life expectancy in the country increased. Now China has come to a position where the dependent population is more. The working population is forced to feed too many mouths. The US-China trade war is another major reason for the reduced growth rate. China’s overall trade plunged down when the US banned Chinese on-chip supplies.