Chinese growth choked by stringent Covid lockdowns

The communist nation is not expected to overtake the US as the world’s biggest economy until 2036 after repeated Covid lockdowns stifled growth.

China is not expected to overtake the US as the world’s biggest economy until 2036 after repeated coronavirus lockdowns stifled growth in the country, forecasts show.

Two years ago, China was expected to overtake the US by 2028. Last year, the forecast was delayed until 2030 and now, the Centre for Economics and Business Research expects that it will take until 2036 for output in China to overtake that of America.

Trade tensions with western countries have added to China’s woes after pandemic-induced lockdowns took their toll on economic activity, according to the economists’ latest “world economic league table”.

Until recently, the Chinese government had implemented a strict “zero-Covid” policy that had led to the port at Shanghai, the world’s biggest, being closed for weeks at a time, contributing to global supply disruptions and pushing up the cost of supplies for businesses.

However, the country – the world’s biggest manufacturer and goods exporter – was rocked by protests in recent weeks after at least ten people died in a fire at a block of flats in Urumqi, capital of Xinjiang, the region that is home to the country’s Uighur minority. Local residents said doorways and fire exits in the building had been sealed to control Covid, claims that were denied by officials in the city.

Factory output contracted for a fourth consecutive month in November, according to the latest purchasing managers’ index compiled by Caixin and S&P Global.

Meanwhile, the US economy has recovered relatively well since the pandemic and has benefited from an improvement in its terms of trade after aggressive interest rate rises from the Federal Reserve, its central bank, boosted the value of the dollar.

The CEBR added that, if China attacked Taiwan, there was a good chance the “scale of resultant international sanctions would impair the economy to the extent that the country never manages to overtake the US”.

China has increased its threats towards Taiwan in recent months, but an attack would prompt retaliation from countries that buy exports totalling about 15 per cent of China’s GDP, CEBR analysts said.

India is on its way to becoming the world’s third economic superpower, with revised GDP figures showing that it overtook the UK to become the world’s fifth-largest economy last year, according to the report, which added that it would overtake Germany to become the world’s fourth-largest economy in 2026 and overtake Japan to become the world’s third-largest economy in 2032.

Russia, the world’s ninth-largest economy this year, is expected to fall back to 14th place by 2037 after being sanctioned for its invasion of Ukraine.

Kay Daniel Neufeld, director and head of forecasting at the CEBR, said: “It is likely that the world economy will face recession next year as a result of the rises in interest rates in response to higher inflation. Central banks were very slow to realise the scale of the inflationary problems and, as a result, the rises in interest rates and the monetary deceleration have been abrupt.

She added: “The good news is that inflation should fall quite quickly, the bad news is that in many countries it will take a recession to make this happen.”

The Times