On March 5, China announced a GDP growth target for this year of about 5.5%, the lowest target since 1991. But that should not come as a surprise. In 2013, World Bank economists and the Chinese State Council projected that China's annual growth rate would decline to 5% by 2030. This may still be an overestimate, given that growth rates during 2010-16 have been found to be inflated by 1.8 percentage points and that average growth in OECD economies is around 3%.
Back then, economists and policymakers also accurately predicted the main challenges to long-run growth in China, including increasing inequality, corruption, an ageing population, inefficiency in large and often state-owned firms, and pollution. But no one could have foreseen the additional significant economic uncertainty stemming from the Covid-19 pandemic and now Russia's invasion of Ukraine.
The pandemic has severely disrupted supply chains and pushed up prices everywhere. China is particularly worried about rising food prices, because the country is a net importer of food, with the bill totaling $133 billion in 2019. Supply problems and bad weather caused the price of vegetables in Chinese cities to increase by 30.6% year on year in November 2021. The price of eggs, a major source of protein for the middle class, rose by 20.1% over the same period.
