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  • China’s GDP per capita stood at $ 10,000 in 2019, still a long way from the US
  • The goal is to put it at $ 30,000 and reach the average for developed countries
  • The Asian ‘giant’ wants to promote domestic consumption

China had in 2019 a trade surplus with the United States of 330,000 million dollars. Total exports of goods and services to its economic rival amounted to 450,000 million, while imports made in the USA were only about 120,000 million, without including in these data the dependent region of Hong Kong.

In 2005, the surplus was less, 200,000 million. Underlying this evolution are the tariff tensions of recent years, in which China has continued to widen the differential in its favor, even increasing the supply base and making it technologically sophisticated, while it has focused on increasing domestic consumption and creating a own middle class -exceeding the global factory phase-, without renouncing the formula of “state-sponsored capitalism”, as they call it in Julius Baer, which the global supply and demand shock caused by the pandemic has forced turn to both the United States and the rest of the developed economies, with historical monetary and fiscal stimulus plans that aim to accelerate economic recovery when vaccines put a stop to coronavirus infections.

Now, after being the first power to enter and exit the crisis – it is even expected to close 2020 with a GDP growth of close to 2% and that in 2021 it will accelerate it above 8% -, the Asian giant dares to forecast that its per capita income will rise – part of just over $ 10,000 in 2019 – to the “average level of developed economies” within 15 years.

An ambitious goal that will require the country to triple its current levels by 2035, placing it almost on a par with economies such as South Korea or Spain, whose GDP per capita is around $ 30,000.

China unveiled this goal along with its fourteenth five-year plan, which covers from 2021 to 2025, and a medium-term development initiative that concludes precisely in 2035. The red dragon authorities have not detailed exact objectives, but have instead stated a set of priorities, which go beyond a developing economy, including, of course, a call for increased domestic consumption and self-reliance on science and technology.

The Communist (and only) Party of China indicated at the end of October that it will carry out “sustainable and healthy economic development” in the next five years, in part by increasing demand from its citizens, according to the proposal document, published by the agency. state news agency Xinhua.

“With a sustained global recovery underway and vaccine launches just beginning, China should continue to experience a sustained recovery,” says Garrett Melson, analyst at Natixis IM Solutions, who shares “expert consensus estimates that place that growth around 8 , 2% for 2021 and 5.5% for 2022 “.

In addition, the analyst comments that from the French bank “we hope that services will be the greatest beneficiaries” of this recovery, while “goods should continue to have a solid demand”, a dynamic that, as he emphasizes, “further demonstrates the importance of domestic consumption and investment to drive growth. “

“The supportive policy that China implemented in response to the pandemic focused on supply-side measures with limited easing of financial conditions in the hope of a strong recovery in production that would boost a recovery in consumption without the same dependence on debt as previous crises “, continues Melso, who considers that there was a” risk that domestic demand would never materialize “, although it seems that” recent data move in the direction correct “, although it warns that” a month is not a trend “in reference to the last published data on retail sales.

Reaction and recovery

China was the first major economy to suffer the coronavirus shock in the first quarter of 2020, which, on the other hand, was already noticed in the rest of the economies and was, together with the first infections in Europe, the trigger for the crash of the bags that started on February 19 and did not hit the ground last mid-March.

If in developed markets the technological Nasdaq 100 was the first major index to regain levels prior to the shock of the pandemic, just 20 weeks later, after collapsing around 30%, the CSI 300, the selective reference of the stock market of Shanghai followed him closely, with the leadership of companies that already protect the great dominant groups on Wall Street and Europe, such as Alibaba or Pinduoduo – Amazon’s Asian alter ego -, Tencent – Internet conglomerate that rivals Facebook- , IQiyi and Baidu -the Chinese netflix and google, respectively-, or the automobile company BYD -the fourth manufacturer of electric cars in the world with a market share of 7% in this market.

The recovery of the Chinese stock market was preceded by the country’s economy. In April, the leading index of manufacturing activity, the Caixin PMI, once again indicated expansion after sinking to contraction levels in March. In May, it fell slightly, and since then strong growth has advanced, which is reflected in the expectation that GDP will increase by 2% at the end of the year, the great exception of a devastating 2020 for the rest of the world.

“China’s experience with the pandemic has been very different from that of most economies outside of Asia, having quickly imposed strict lockdowns and emerged from the crisis faster than its neighbors and other great powers,” acknowledges Stéphane Monier, strategist by Lombard Odier, who observes that “the country will register a GDP growth of 8.4% in 2021, against the expectations of the majority of 8.1%, before falling back to a level of 5.2% in 2022, which would be more in tune with its long-term growth trend “, adding that” this makes the Chinese economy the one that can return to the pre-pandemic GDP trend faster, even without the benefits of a vaccination program ” .

Chinese vaccine

“China has led the development of vaccines thanks to its early exposure to the Covid-19 pandemic and the continued support of the government”, they influence Nomura, from where they affirm, that, “in terms of the implementation plan, the Chinese government still it has not announced any specific plans, although it authorized the emergency use of the vaccine on July 22, and select groups (including front-line health personnel and border control officials) and certain regions have started receiving doses. “

According to the National Health Commission of China (NHC), the annual production capacity of China’s Covid-19 vaccine is expected to reach 610 million doses by the end of 2020 and more than 1 billion doses in 2021.

Ambitious goal

“At first glance, China’s per capita GDP ambition for 2035 seems unrealistic: the country’s economy has grown by 6.7% on average per year since 2015 and claims to need an average growth of 4.7% in this decade to double, however, as Michael Pettis, professor of economics at Peking University recently wrote, this poses an increasing challenge, as the Asian country’s workforce is aging and historical growth largely depended on measure, of the increase in debt “, reflects Stéphane Monier, Lombard Odier.

According to the UN, China’s population is expected to decline by around 7% by 2035. “Sustaining higher yields requires a massive investment-driven industry and export boom, thus generating an increase in debt.” continues the expert.

While GDP has doubled in the past ten years, China’s public debt-to-GDP ratio increased from 34% in 2010 to more than 63% in the third quarter of 2019, according to data from the Institute of Finance. International (IIF). Adding the debt of households and non-financial companies leads to an increase in the debt-to-GDP ratio from 178% to 289% during the same period.

“In 2018 and 2019, China was busy dealing with financial risks related to deleveraging, slowing growth after stimulus between 2015 and 2017 and the trade war with the United States, and then 2020 came, but after the storm comes the rainbow “, they say in Nomura.

The devaluations of the yuan since the summer of 2015 caused the main earthquakes in the markets, along with Brexit, before the pandemic. Since 2019, the Asian currency continued to depreciate to the maximum of the dollar at almost 7 yuan, which it registered in September of that year and at the peak of tension of the coronavirus crisis, from where the dollar has fallen by 9% to relief from North American companies.

“If Beijing can successfully manage some credit risks, China is ready to further solidify its global status and significantly reduce the gap with the rest of the developed countries, since with Biden in the presidency of the United States, trade relations are again more predictable “, they conclude in the bank.

China’s fiscal response has been less supportive than that of other states, with measures equivalent to 4.6% of GDP, compared to 11.8% in the United States, 5.5% in France and 8.5% in Germany. “This responds to the lesser impact that the virus has had on its economy”, remarks Stéphane Monier.

“In line with the reduction in fiscal spending, the People’s Bank of China (PBoC) has avoided the extraordinary monetary easing applied by other central banks, and a relatively stable Chinese economy suggests that policy-makers will be able to maintain interest rate policy. interest on hold for the entire year 2021, “says Lombard Odier analyst.

“We consider that the main risk for the Chinese economy is a drastic increase in corporate leverage,” he warns, and concludes that “the PBoC should manage concerns about levels of real estate debt and any signs of imbalance in corporate credit, with specific measures such as restrictions on real estate developers who issue bonds in dollars. “

In addition, most economists indicate that inequality and inflationary pressures should remain limited: food prices, which account for about a fifth of consumer spending, should continue to decline, according to different voices, who link this risk with “food safety”.


Chinese President Xi Jinping has strengthened his position with control of the Communist Party, given the country’s experience with the virus. In 2018, the Chinese People’s Congress removed the constitutional limit of two five-year presidential terms, allowing Xi Jinping to stay in power longer than the traditional decade.

“Meanwhile, the country shows less tolerance towards the discrepancies in Hong Kong, this was reflected a few days ago with the jailing of activists for the 2019 protests, in addition, tensions with the United States are intensifying in terms of strategic issues and of competition with American and European technology companies “, argues Stéphane Monier.

“China currently poses the greatest threat to democracy and freedom worldwide since World War II,” John Ratcliffe, current US director of national intelligence, wrote in the Wall Street Journal recently.

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