BOFIT Forecast for China 2023–2025 / 1

Abstract

The Chinese government made a surprising reversal of its zero-covid policies late last year. Lockdowns ended and the economy was allowed to reopen. GDP growth is now on track to overcome the Communist Party of China’s official target of about 5 % this year, thanks in part to the last year’s low reference basis. The stabilisation of the real estate sector also facilitates growth. As the recovery phase subsides, growth is likely to slow towards the end of our forecast period. A number of factors still restrain growth, including high indebtedness, a greying population, a shrinking working-age cohort, the absence of reforms to promote productivity and the CPC’s ever-tightening grip on the economy. There is a possibility that growth exceeds our forecast due to stronger-than-anticipated consumer demand. However, risks of lower growth exist as well. The ever-growing debt could ultimately be disruptive for financial markets and the banking sector. There is also a danger that superpower relations deteriorate further.