David Roche, president of Independent Strategy, has stated that China’s economy will need to recalibrate due to a “fractured” global order, with new drivers of growth that are likely to disappoint global markets. The Chinese government recently announced a target of around 5% GDP growth in 2023, which is the country’s lowest in more than three decades and below the 5.5% expected by economists.
Roche said that the hegemony of the US is now fractured in the global economic order, and that Russia and China are detaching from Western democracies. Roche noted that a third fragment has formed in the “big south,” including countries like Brazil and India, which he signaled are not overtly siding with authoritarian powers such as Russia but are prioritizing their own interests and resisting Western pressure to sever economic or military ties.
Roche also said that China knows it needs to achieve growth domestically by undertaking reforms that have not yet been taken and getting consumers to spend excess savings. He also noted that the US will look to curtail China’s global influence by growing the technology gap, which is expected to widen from five to 10 years at present to around 20 years.
Moody’s recently stated that the external environment will remain challenging for China as the US and other high-income countries reposition their technology investment and trade policies in light of growing geopolitical and security considerations. The agency also said that additional measures by Western countries to restrict investment flows to China, block access to technology, restrict market access for China’s firms, and promote diversification policies could continue to weigh on foreign investors’ risk perception regarding doing business in China and weaken China’s economic outlook.