“Two key factors at play are the fact that China now has a well-developed middle-class, and it also faces demographic issues,” according to Haworth. It has an aging population, causing some of its economic challenges. This includes fewer working-age people to support the needs of its elderly population, and ultimately, a potential decline in the country’s overall population, which could hamper future economic growth. For the first time in history, India in 2023 supplanted China as the world’s most populous nation.
A cooling of U.S.-China relations
After a long period of reasonably open trade with the U.S., President Donald Trump in 2018 implemented new tariffs and other restrictions, most of which remain in force under President Joe Biden. “The more restrictions you have on trade, the more that friction gets built into economic growth expectations,” says Tom Hainlin, national investment strategist at U.S. Bank Wealth Management.
Additional tensions exist in relation to China’s claims over Taiwan. The issue arises frequently, but Haworth notes that it has persisted for decades. “Taiwan continues to assert its independent status, and while there is some wariness about China’s ultimate intentions in relation to Taiwan, it hasn’t yet created any direct economic concerns,” says Haworth.
China’s economic reopening and growth trajectory
China’s economic recovery was slow to emerge since it eliminated its zero COVID policy in late 2022. China’s growth of 5.2% in 2023 exceeded the previous year’s 3.0%, but is still considered lagging by historical standards.4
Hainlin notes that troubles in the real estate sector can take a toll. “China’s real estate market is almost viewed in the same way we in the U.S. look at our stock market. If China’s housing market is lagging, that can dampen consumer confidence about other forms of spending,” says Hainlin.
Based on the latest indicators, it appears China’s GDP may be on a slower growth trajectory than was the case for much of the last two decades.