China’s economy will never dominate the West, says Lowy Institute report

China’s economy will never “dominate” the West as the communist superpower will run out of steam within three decades, according to a new report.

The authoritarian nation of 1.4 billion people is on track to overtake the United States as the world’s largest economy.

But Australia’s leading think tank, the Lowy Institute, suggests it won’t hold onto the top spot for long as decades of draconian politics come back to bite it.

An aging population, falling birth rate and further decoupling from advanced Western economies all point to dramatic economic decline after more than 10 years of double-digit growth in the 2000s.

While the prediction could be good news for Australian policymakers in Canberra who fear Beijing’s growing influence, the downturn is also likely to hamper Australia’s economic future.

Lowy Institute report predicts China will overtake US economy but won’t retain top spot for long as decades of draconian political policies come back to bite it

An aging population, falling birth rate and further decoupling from advanced Western economies all point to a dramatic economic decline for China's economy.

An aging population, falling birth rate and further decoupling from advanced Western economies all point to a dramatic economic decline for China’s economy.

“China would overtake the United States to become the world’s largest economy in nominal US dollar terms by around 2030,” report authors Roland Rajah and Alyssa Leng wrote.

“But it would never establish a meaningful lead over the United States and would remain far less prosperous and productive per person than America even at mid-century.”

If China were to continue to grow by 4 to 5% per year until 2050, it would assert itself as the “dominant” world power, the report underlines.

But its authors say China’s future “looks very different” and that 2-3% growth is much more realistic in the wake of Beijing’s disastrous one-child policy.

“China’s working-age population has shrunk since the middle of the last decade,” the report said.

“The fertility rate has fallen rapidly over the past decade to just 1.3 births per woman in 2020, well below the replacement rate of 2.1.

“This is broadly in line with lower United Nations projections, which suggest that by 2050 China’s working-age population will have shrunk by about 220 million people, or about a fifth of its current level.

“At the same time, rapid aging will see its demographic profile rapidly converge towards that of Europe, itself aging.”

Report says China's future

Report says China’s future ‘looks very different’ and 2-3% growth much more realistic in wake of Beijing’s disastrous one-child policy

The over-65s will also make up more than a quarter of China's population by 2050, putting tremendous pressure on the health sector and public services.

The over-65s will also make up more than a quarter of China’s population by 2050, putting tremendous pressure on the health sector and public services.

The over-65s will also make up more than a quarter of China’s population by 2050, putting tremendous pressure on the health sector and public services.

China’s economic miracle, which saw an estimated 800 million citizens lifted out of poverty during the greatest period of wealth creation in human history, was driven by its engagement in the global economy and liberal Western markets.

But since the ascension of President Xi Jinping in 2013, the communist country has reverted to its old ways, becoming more paranoid and closed off.

“While previous East Asian miracle economies benefited significantly from relatively free access to Western markets and technologies, geopolitics means that China can no longer do so,” the report said.

‘[China] rather faces the prospect of further ‘decoupling’ with the United States and potentially other advanced Western economies.

China's economy has been driven by its engagement with the global economy and liberal Western markets, but President Xi Jinping's regime has seen the communist country revert to its old ways, become more paranoid and closed off.

China’s economy has been driven by its engagement with the global economy and liberal Western markets, but President Xi Jinping’s regime has seen the communist country revert to its old ways, become more paranoid and closed off.

The United Nations predicts that China will lose a fifth of its working class by 2050 due to its aging population

The United Nations predicts that China will lose a fifth of its working class by 2050 due to its aging population

China has also relied heavily on debt to support its economy with exuberant public infrastructure projects often described as “bridges to nowhere”.

Ghost towns have also become a problem in the real estate-obsessed nation where home ownership is the preferred way to build wealth due to stock market bureaucracy.

One of the world’s biggest real estate developers, Evergrande, owes $400 billion, threatening to drive down property prices and push China into a recession.

Such a scenario could be detrimental to Australia, as the resource-rich nation flourished during the rise of China, fueling Beijing’s endless demand for commodities like iron ore and coal.

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