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– China’s disappointing post-COVID recovery has raised significant doubts about the foundations of its decades of stunning growth and presented Beijing with a tough choice for 2024 and beyond: take on more debt or grow less.
The expectations were that once China ditched its draconian COVID rules, consumers would burst back into malls, foreign investment would resume, factories would rev up and land auctions and home sales stabilize.
Instead, Chinese shoppers are saving for rainy days, foreign firms pulled money out, manufacturers face waning demand from the West, local government finances wobbled, and property developers defaulted.
The dashed expectations have partly vindicated those who always doubted China’s growth model, with some economists even drawing parallels with Japan’s bubble before its “lost decades” of stagnation starting in the 1990s.
China skeptics argue Beijing failed to shift the economy from construction-led development to consumption-driven growth a decade ago, when it should have done so. Since then, debt has outpaced the economy, reaching levels that local governments and real estate firms now struggle to service.
