Historically low growth in China over the next five years: only +3.9% on average

China's growth miracle is a thing of the past. Over the next five years, average growth will be just 3.9%. Ten years ago, annual growth was around +10%. According to our experts, China's role as the absolute engine of the world economy has come to an end.

"The slowdown in Chinese growth also means upheaval for many Western economies. The IMF estimates that if Chinese growth falls by one per cent, the rest of the world will grow by 0.3 per cent less. This forecast is also sensitive information for Belgium. Retail chains that import cheaply from China will find it difficult to find production facilities, because China will be selectively choosing the sectors that offer the greatest added value," explains Johan Geeroms, our Director Risk Underwriting Benelux. He believes that the Chinese recession will change the situation. China will not continue to play its role as the 'factory of the world'.

According to Johan Geeroms, the Chinese government is determined to stabilise the economy and prevent any further decline. In his view, the country will increasingly focus on specific growth sectors. Think electric cars, batteries and solar energy products.

"American and European companies active in this sector need to be prepared. Look at what is already happening with electric cars (100% battery electric, not counting hybrids): in the world's top 5, there is only Tesla, the rest being Chinese brands. Neither Ford, Volvo nor BMW are on the list. Chinese hegemony is only set to grow. According to Elon Musk, Chinese carmakers are the most competitive in the world and China will crush most other manufacturers if tariff barriers are removed. He points to the military precision with which China goes about achieving certain economic objectives. We must not take this lightly.

The country also reigns supreme in the battery sector. For example, 56% of batteries for electric cars come from China. The same applies to the use of renewable energy sources. China accounts for over 80% of the world's production of solar panels. What's more, the progress of Chinese innovations in the automotive and energy sectors is under pressure from the chip war, protectionist measures and geopolitical tensions.

Despite the successes mentioned above, China is heading for lower trend growth. Allianz Trade is forecasting average growth of 3.9% between 2025 and 2029. Before the start of the corona crisis, the credit insurer was still forecasting an average of 5%.

According to our report, the country is facing persistent problems on a number of fronts, such as high unemployment among young people and an ageing population. Added to this are the trade restrictions imposed by the United States and Europe, and the huge property crisis.

Johan Geeroms: "It's not just companies in this sector that are affected. Consumers are also seeing the value of their homes continue to fall. As a result, confidence in their own economy is being severely tested. Chinese consumers are therefore spending less for fear of a further deterioration. With financial injections, the Chinese government will try to revive the property sector, but building even more homes and offices will only increase vacancy rates."