China now knows that if it continues its growth, it has to do it domestically, which means a change that has not yet taken place, forcing consumers to spend excess savings, which it is doing at a very slow pace.
China’s economy will recalibrate due to the disruption of the global order, and the new driving force behind growth will “disappoint” global markets.
At the National People’s Congress on Sunday, China’s government announced a target for gross domestic product growth of about 5% in 2023 – the country’s lowest rate in over three decades and below the 5.5% expected by economists. The administration proposed an augmentation in financial backing for the economy, raising the budget deficit estimated rate from 2.7% in 2022 to 4% in the current year.
The president and other officials have targeted the West for limiting China’s growth prospects as tensions between Beijing and Washington deteriorate.
The external environment will challenge China as the U.S. and other high-income countries align their technology investments and trade policies with growing geopolitical and security considerations.
The U.S. will try to curb its global influence by increasing the “technology gap,” which it expects to widen from 5 to 10 years to about 20 years. To do this, Washington can use its power to monopolize trade with countries in innovative technology areas that can serve both missiles and mobile phones – for example, the industry in the Netherlands.
Western countries’ implementation of extra regulations, including restrictions on investment going into China, denial of access to technology, limited market entry for Chinese companies, and propagation of various diversification approaches, may have lasting effects on external investors’ risk considerations when conducting business in China.
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