Global Economic Perspectives: China’s Economic Shifts and International Implications

研报英文原文证据摘录

Global Economic Perspectives: China’s Economic Shifts and International Implications

China’s economic challenges and shifts

For decades, China’s rapid economic growth has been propelled by both strong

domestic investment and exports. Local governments were key drivers behind

domestic investment, using land sales and the property market to help finance

infrastructure investment and industrial parks. Infrastructure and property investment

further boosted demand for industrial products, magnifying industrial capacity

expansion. In recent years, the growth model has faced significant challenges.

Local governments have come under increasing fiscal strain, especially following the

property downturn that has yet to end (Figure 1&2). Overcapacity has become more

persistent across more sectors. Exports, long a key growth engine, are facing constraints

from rising protectionism and China’s own scale, despite recent resilience. Meanwhile,

population aging and decline have dampened consumer and investor expectations,

while the labor market has remained weak, with youth unemployment remaining high.

Figure 1: Property – from an engine to a drag (with 2026E) Figure 2: Local government debt has increased overall

men overall

ag (with 2026E)

ern y

t ov

r g

e al

op oc

Pr

L – fr om a n en gine to a dr

t de bt h as i nc re as ed

Source: CEIC, UBS estimates Source: CEIC, UBS estimates

China’s policymakers have long recognized the structural imbalances

embedded in the old growth model, as well as the associated risks. The central

government has repeatedly called for economic transition away from property- and

investment-heavy growth toward a more consumption-oriented model; and from high-

speed, scale-driven industrialization toward higher-quality, technology-driven

development.