China’s economy had a miserable year. 2024 might be even worse

The Chinese economy was expected to recover quickly in 2023 and resume its role as the undisputed engine of global growth. Instead, it stalled to the point where it’s being called a “drag” on world output by the International Monetary Fund (IMF), among others.

The Chinese economy was expected to recover quickly in 2023 and resume its role as the undisputed engine of global growth. Instead, it stalled to the point where it’s being called a “drag” on world output by the International Monetary Fund (IMF), among others. Despite its many problems — a property crisis, weak spending and high youth unemployment — most economists think the world’s second largest economy will hit its official growth target of around 5% this year. But that is still below the 6%-plus annual growth averaged in the decade before the Covid pandemic, and 2024 is increasingly looking ominous, they said. The country may be staring at decades of stagnation thereafter. “The 2024 challenge for the Chinese economy will not be GDP growth — that will likely be above 4.5%,” said Derek Scissors, senior fellow at the American Enterprise Institute, a center-right think tank. “The challenge will be that the only direction from there is down.” Without major market reforms, the country could be stuck in what economists call “the Middle Income Trap,” he warned, referring to the notion that emerging economies grow quickly out of poverty only to get trapped before they reach high-income status. For decades since China re-opened to the world in 1978, it was one of the fastest growing major economies on Earth. Between 1991 and 2011, it grew by 10.5% annually. The expansion has slowed during Chinese leader Xi Jinping’s rule, but was still averaging 6.7% in the decade through 2021.