With the steep and rather sudden rise in US GDP growth of 6.4 per cent in the first quarter of 2021, China’s party may have got spoiled. Beijing was aiming to become the largest economy by the end of this decade.
But a report published in Bloomberg said that the “outcome is far from guaranteed.”
“China’s reform agenda is already languishing, tariffs and other trade curbs are disrupting access to global markets and advanced technologies, and Covid stimulus has lifted debt to record levels,” the report said.
Economists have noted that China is already fighting internal economic battles. Uncertain demand situation, shrinking labour force, rising wages, increasing unemployment and under-employment have hit China.
Besides, China’s huge investments in the Belt and Road Initiative is also causing internal worries as returns from the project have thinned down amid the Covid 19 pandemic.
Chinese President Xi Jinping and his men’s treatment to the home grown private sector also has come under the scanner. Many countries and companies are now looking to derisk their supply chains amid the Covid 19 crisis and reports of alleged human rights violations in Xinjiang.
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“China is facing many challenges which could impact its growth in the coming years. Though the country has been growing at impressive levels, sustaining that will be difficult as several bottlenecks have come up. Already it has witnessed wages going up and on top of that the Belt and Road Initiative is becoming a cause for concern as returns on investments are uncertain,” DK Srivastava, EY India’s chief policy adviser told India Narrative.
The massive stimulus package announced by the US administration is likely to keep pushing the American economy, another analyst said.
Last year, when the US economy was battling the Covid 19 pandemic with a high infection rate and deaths, many had opined that the country would be in no position to recover. “But the 6.4 per cent growth in the first quarter has surprised the world, forcing the analysts to rethink once again,” a senior executive engaged with an American multi-national company told India Narrative.
“Early in the Covid 19 crisis, when China managed to control infections and maintain growth even as the U.S. suffered hundreds of thousands of deaths and a crunching recession, many were inclined to agree. More recently, an unexpectedly fast U.S. recovery has illustrated just how much uncertainty remains around the timing of the transition—and even whether it will happen at all,” the report by Bloomberg noted.
