There have been considerable disruptions to China’s economy throughout 2021 with the economic downturns, COVID-19 restrictions, China-U.S. trade war, and power shortages. Heading into 2022, America’s rivalry with China is a significant issue. Effective from June 2022, the US bans imports from the cotton-rich region of Xinjiang unless authorities prove that there’s no forced labor.
However, with a GDP growth of over 5% (higher than the global average), China’s economic outlook is predicted to be bright. Nevertheless, the political environment and COVID-19 outbreaks will create supply chain bottlenecks.
To counter these impacts, the China government will give preference to economic stability and recovery. Despite the economic slowdown and closed borders, international trade has reached record-breaking levels. And as a result, companies sourcing from China continue to maintain a promising stance.
Trade and Sourcing from China, this 2022
Despite the economic downturn and the challenges faced by the China economy, there are reasons to stay positive in 2022. First, the relatively stable economy has increased productivity, which is good news for companies sourcing from China.
A 2021 report by the American Chamber of Commerce in Shanghai states that more than 72% of businesses have no plans to move their supply chains out of China for the next three years. These reports are close to the pre-trade war levels, which looks to stay that way in 2022. The remaining 28% plan to move some production but not all and still retain their footprint in China.
Medical devices, pharmaceuticals, automotive, industrial manufacturers, and non-consumer electronics are expected to see a high potential for growth in 2022. However, there are a few factors that affect China’s growth rate.
China’s one-child policy has an unforeseen impact on the economy. The low fertility rate means that the working population has already peaked. If fertility continues to below, there is a projected drop of 28% in the next three decades.
However, the government has taken the necessary steps and increased the limit to two children in 2016 and three in 2021.
While the population continues to decline, the China government has plans to offset the impact. For example, plans are underway to increase the retirement age and keep the older workers working for longer.
With China’s track record of economic reforms, experts expect China to catch up to 70% of the US level by 2050.
China aims to boost growth via innovative work and advanced technologies without relying on more workers and investment. However, it may not be as easy as it sounds. Europe is backing away from a significant trade agreement, and India closes its doors to Chinese technology.
Not to mention Americans’ distrust of China is at a record high of 76%. Of course, the human rights violation in Xinjiang and the blame game over the COVID-19 pandemic hasn’t helped either.
There has always been widespread doubt about China’s GDP. A study by the University of Chicago and the Chinese University of Hong Kong also suggests the same. Even the country’s leaders have acknowledged the same issue. This increases the doubts about China’s GDP data and growth reliability.
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