A time when we're expecting a global slowdown, how
much of a cushion will China's growth provide the world
? Hi, you know, first it's a pleasure
to be here. And yes, you know,
China is really going to be a key driver of
global growth this year. At a time when the
global economy is slowing from 3.4% growth last year to
2.8, we have China growth picking up from 3
to 5.2. And by our math, China will
explain one third of global growth this year just underscoring
how important China is for the global economy. And
yet we continue to see these geopolitical tensions play out
with the US. How much will these new investment
curves or just broader economic fragmentation hurt the prospects of
growth? Yeah, I think that's a, you
know, it's a great point, we know that
the geopolitical fragmentation or the world dividing the trade box
can be extremely costly. You know, in a
kind of adverse scenario, it's easy to see global
output being reduced by 7% from trade fragmentation. That's
the equivalent of removing Japan and Germany from the global
economy. And that's just trade, if we also
have technology decoupling, you know, we could see
losses in some economies that are upward to 12% to
GDP. So really those are outcomes we want to
avoid Steve, there's so many facets to the China
recovery story, right? And we see the short-term
kind of lift when it comes to, you know
, high end consumers, when it comes to demand
for services and obviously still some weak spots as well
. But are you looking more at the longer term
challenges that were already in play before the pandemic?
The demographics? What sort of reforms would you be
urging be prioritized at this point? Yeah, I
mean, that's a great point. There's there's one
that is both short term and long term and that's
the importance of uh boosting consumption over time. So
here, the QR numbers were quite good. We
saw that 12 3rd of growth in the first quarter
was driven by the rebound and consumption, which is
really related to the reopening of the economy that also
points to the long term challenge. We know that
consumption in China is a funny story. It's actually
been one of the fastest growing consumer markets in the
world over the past 20 years. But consumption as
a share of GDP is among the lowest in the
world. So finding ways to boost consumption over time
would increase living standards and can also drive growth.
But I think that the other key demographics is the
head wind but just finding the kind of market reforms
to unleash the productivity growth. At the end of
the day, China's medium term growth will be driven
by the ability to continue to find market enhancing reforms
that boost productivity. This is the age old question
as to whether the middle income trap can be avoided
, right? Are we getting to a point where
structurally slower growth is going to be the new normal
for China? And how does policy potentially deal with
that? I think that, I mean, clearly
as the economy gets richer and it grew growth was
gonna slow and you know, they've managed to slow
down from, we had a decade of 10% growth
. Now we're seeing growth rates and this year we
expect 5.2 over the medium term, we have growth
slowing to around 3.5. They managed that process.
Well, it's still growing faster than in the world
. They can still see big gains in living standards
in China, especially gains in output per worker.
So the but it's difficult as an economy gets richer
. It's harder, you know, the first boost
of growth after China joined WTO was really taking workers
from the farms and putting them into the factories.
This reallocation of labor really can drive growth. The
next stage is just tougher, it's getting more productive
within sectors, not necessarily moving resources between sectors,
but within this industry, within services within manufacturing,
using the resources better.