China’s economy is a growing source of growth for the world’s second-largest economy, and its export-led recovery is a boon to domestic consumption, helping to underpin economic growth and job creation.
But the country is also on the cusp of a major economic crisis.
A glut of cheap steel and steel products has slowed production, and the government has cut back on subsidies and tightened controls on financial transactions.
With the economy set to expand by 6.6 percent in the third quarter of 2020 from a year earlier, China’s biggest export market is now on the verge of becoming the world champion for electric vehicles.
“The Chinese economy is on the edge,” said Li Yan, an economist with China’s Central Bank.
“We are at a tipping point, and we’re going to see this in 2020.”
While there are few signs of the Chinese economy overheating, there are signs of a slowdown.
China’s gross domestic product (GDP) fell by 7.1 percent in 2018, and by 9.3 percent in 2020.
The economy’s manufacturing sector, which is responsible for around 80 percent of China’s exports, was the weakest in 20 years, according to the Chinese Academy of Social Sciences.
China’s economy grew 6.7 percent in 2021 from a decade earlier, but is set to shrink by 3.2 percent this year and 3.7 in 2020, according the Shanghai Composite.
In the wake of the crisis, the country has tightened controls and has restricted foreign investment in its stock market, as well as curtailed access to overseas credit.
That has prompted some of the world, including the U.S., to impose limits on their own stock markets.
China is also preparing to launch a public-private partnership program to develop electric vehicles, and a new Chinese company, Lidar Corp., is planning to open an electric-vehicle factory in the U.-S.
state of New Mexico.
But as the Chinese government struggles to contain the crisis and its economy slows, analysts say that China will have to pay to keep the lights on, as it struggles to pay its bills and keep its manufacturing base strong.
“China is not going to be able to pay off its debt,” said Yoon Yong-ho, head of emerging-markets economics at the Peterson Institute for International Economics.
“There is a lot of scope for a country like China to go into a deficit.”
The U.K. economy grew 5.4 percent in 2017, but the country’s economy shrank by 6 percent in 2019 and by 8.2% in 2020 amid the economic crisis, according an Oxford Economics analysis.
The country’s share of global gross domestic products rose to 7.5 percent in 2022 from 6.9 percent in 2011.
China, however, is expected to overtake the U, S. and Japan as the world leader in terms of global growth, according a recent report from the McKinsey Global Institute.
“It’s clear that China is the top engine of growth, and it’s going to have to be a huge amount of debt to make sure that they are able to keep this momentum going,” said Stephen Gershengorn, an economics professor at the University of Maryland and a senior fellow at the Mercatus Center at George Mason University.
Gershengorgon, a former top U.N. economic adviser, said China’s debt could be a key factor in the countrys ability to weather the crisis.
“A country like a Chinese economy, that has a debt load, is going to need a lot more credit to make up for the debt,” he said.
China and the U-S.
remain the biggest exporters of the global car industry, which accounts for nearly half of the $4 trillion in global vehicle sales, according TOEFL tests released earlier this year showed.
The two nations have been trading barbs over tariffs and other economic matters, but analysts say they’re unlikely to escalate anytime soon.
“I don’t think China is going back to the status quo,” said Robert Shiller, chief investment officer at BlackRock.
“China has been very successful in making the economy more efficient and the world has benefited from China’s economic growth, so I don’t see any major impediment to them continuing to do so.”