144.37 0.26%
    0.88 -0.16%
    1.09 0.55%
    1.24 0.71%
    0.68 1.51%
    132.42 -0.28%
    0.63 0.67%
    0.91 -0.26%
    1.34 -0.6%

The US economy may grow more than China’s this year

China's economy is expected to grow by only 2% this year, while the US gross domestic product is expected to grow by 2.8% this year.

Restrictions on movement in China due to the covid-19 disease pandemic are likely to mean that the growth rate of the Chinese economy this year will be lower than that of the United States for the first time since 1976.

While Beijing has introduced a series of stimulus measures, fiscal, monetary and regulatory, their benefits are being dampened by President Xi Jinping’s zero-tolerance policy toward the covid-19. This requires severe restrictions on movement and activity in the event of an outbreak of the virus. While the United States is struggling with high inflation, it is still supported by high employment and consumer spending.

While China’s growth forecast is at the lower end of the possible range, economists warn that even in a positive scenario, which envisions the abolition of the zero covide-19 policy, China’s economic growth would fall short of the government’s target of a 5.5% increase in GDP. According to them, growth will not even reach 5%.

For the first time, China has underestimated the risks

The Chinese government began setting growth targets in the late 1990s and it would be the first time it significantly underestimated reality. This is even though this year’s target is the lowest ever set. However, the government has not set a growth target for 2020 because of the pandemic. The economy grew by 2.2% that year.

Since the late 1970s, when China began its opening up and reforms, it has grown faster than the United States, although its GDP per capita still lags far behind the US despite higher growth.

Chinese yuan and US dollars on the map

Read also: UK unemployment lowest in 48 years

This year’s growth target was set before the Shanghai shutdown due to the covid-19, which has negatively impacted spending. Some economists even estimate that China’s GDP will fall this quarter as retail sales and industrial production both fell in April.

However, US President Joe Biden has already taken credit for China’s outperformance, saying earlier this year that the US economy was growing faster than China’s for the first time in 20 years. In fact, in the fourth quarter of last year, the US economy expanded by 5.5% year-on-year, while the Chinese economy expanded by only 4%.

Bruno is an Investment enthusiast with several years of experience in the industry. He enjoys following the latest news and technology trends...


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