RBA Q4 2019 Bulletin: Slowing trend growth in China relevant to the future economic prospects

The Reserve Bank of Australia has published its fourth-quarter Bulletin here and here is a focus on China in the chapter titled, Long-term Growth in China:

Lead paragraph

Slowing trend growth in China, and the risks around this trajectory, are relevant to the future economic prospects of its major trading partners, including Australia. This article provides a longterm perspective on growth in China, beginning with a review of historical trends. It then examines the drivers of growth since reforms were introduced in the late 1970s and how these drivers are affecting the growth outlook. The article concludes that a range of structural headwinds will constrain growth in the coming decade, posing challenges for policymakers.

Conclusion

China’s emergence as one of the largest and fastestgrowing economies in the world, beginning in the late 1970s, followed decades of economic volatility and social and political turmoil. The comparatively benign growth trajectory charted through the period of economic reforms was underpinned by rapid industrialisation, steady rural-urban migration, a rising working-age population, an increased role for the private sector, strong growth in residential investment and productivity-enhancing reforms. However, the reversal or slowing of many of these impulses suggests that China’s period of ‘abovenormal’ growth is drawing to a close. This will create challenges for policymakers, as they attempt to foster continued increases in incomes, while forestalling risks arising from high levels of debt. How the authorities navigate that trajectory will have significant implications for China’s major trading partners, including Australia, in the years ahead.

About the Bulletin

The Bulletin, published by Reserve Bank of Australia, contains articles and speeches that discuss economic and financial developments as well as the Bank's operations. Published monthly until December 2009 and thereafter quarterly. The Bulletin is published under the direction of the Bulletin Editorial Committee: Luci Ellis (Chair), Andrea Brischetto, Ellis Connolly, Darren Flood, Judy Hitchen, Carl Schwartz and Paula Drew (Secretary). The Bulletin is published quarterly in March, June, September and December and is available at www.rba.gov.au. The next Bulletin is due for release on 19 March 2020.