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China’s future growth rate could drop to 2.5% without market reforms: economist

China’s long-term growth trajectory will depend on the introduction of market reforms, and the country’s potential growth rate could fall to about 2.5 per cent in the coming years unless action is taken, a prominent Chinese economist has warned.

“Without a strong turnaround in total factor productivity and a meaningful expansion in household consumption, it will be difficult for China’s economic growth to reach 4 per cent or higher,” said Zhou Tianyong, former deputy head of the Central Party School’s Institute of International Strategic Studies in Beijing.

The warning came as Beijing prepares to unveil its next five-year plan and economic policy priorities for 2026, with policymakers striving to address a series of challenges at home and abroad and boost China’s long-term development by accelerating innovation and raising domestic consumption.

“Our estimates for the 15th five-year plan period [from 2026 to 2030] and the decade beyond put potential growth at around 2.5 per cent,” said Zhou, who is now head of the National Economic Engineering Laboratory at Dongbei University of Finance and Economics, in an article posted on February 1 on the social media platform WeChat.

“Potential growth” is an academic term that measures a country’s long-term and sustainable productivity by calculating the inputs of labour, capital, innovation, entrepreneurs and other production factors.

Zhou pointed to mounting supply-side pressures, as well as significant uncertainty on the demand side, including over fixed-asset investment, household spending and goods exports.

The estimate is far lower than the 5 per cent growth in gross domestic product that China reported last year. It is also below the 4.17 per cent average annual growth rate Beijing has calculated it must hit to double per capita GDP from 2020 levels by 2035.

Social Media Asia Editor