The end of the chinese growth miracle?

The end of the chinese growth miracle?

  • Structural factors cast doubt on Beijing’s ambitions to achieve “medium-developed country” status by 2035. This will have consequences for global economic prospects.
  • China risks turning old before getting rich, with the labour force shrinkage progressively dragging on growth. There is little that policy can achieve to reverse this decline.
  • Productivity growth is not forthcoming, with the low-hanging fruits of sectoral reallocation and industrialization already exhausted. Global decoupling worsens matters.
  • Capital accumulation also faces diminishing returns. Moreover, a concentration of political power increases the risks of policy mistakes which can damage economic growth.

Malaysia’s budget 2023 (anwar’s version)

  • The revised 2023 budget attempts to balance the need for fiscal consolidation, providing support to distressed households, and shoring up political support.
  • While the headline consolidation seems welcome, this relies heavily on assumptions of higher government revenues, which gave the government more scope for spending.
  • The government continues to seek alternatives to reintroducing the abolished Goods and Services Tax, but these do not raise sufficient revenues to fund key policy objectives.
  • Measures to strengthen public finance governance and industrial upgrading are welcome steps to bolster long-term fiscal and economic prospects.

Regional updates

  • South Korea’s central bank retained its hawkish rhetoric even as it paused monetary tightening. Consumer and business sentiment remain weak, indicative of growing difficulties.
  • Hong Kong unveiled a budget to support a nascent recovery and restore its international attractiveness. Notable long-term gaps remain, including attracting and retaining talent.
  • Malaysia’s inflation continued easing due to softening price pressures in transport costs.
  • Singapore is waging a difficult fight against inflation, with headline and core inflation ticking up in Jan 23. Manufacturing headwinds may lead to a broader slowdown.

Read more: CAA-weekly-27-feb-2023.pdf