China's Medium- and Long-Term Growth Outlook and Constraints

Since the Covid-19 crisis, the slowdown in the Chinese economy is becoming increasingly clear. This paper examines and assesses the following four factors as constraints to China’s economic growth: demographics, government’s economic management and innovation, real estate and financial risks, and the U.S.-China conflict and derisking. On the demographic side, the decline in the main population of homebuyers will reduce housing demand, and the aging of the population may have an impact on consumer spending. In terms of government economic management, the strengthening of government micromanagement is seen as a constant constraint on business activity and innovation. The real estate recession remains less likely to pose a risk of a financial crisis. The U.S.-China confrontation has transformed the trade structure, but it is far from decoupling. On the other hand, U.S. efforts to block China’s rise in advanced technologies such as semiconductors will likely cause delays in China’s technological catch-up, but its rise in mature technology fields will continue. Based on the above, this paper revises downward the basic scenario for China’s medium- to long-term growth set forth in Fukumoto (2022).