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China

Weak domestic demand now threatens China’s growth potential

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A woman and a child walk past workers sorting toys at a shopping mall in Beijing, China, 11 January 2023 (Photo: Reuters/Tingshu Wang).

Author: Yang Yao, PKU

Forecasts for China’s economic growth in 2023 diverge widely. While international organisations and China watchers abroad predict growth of 4 per cent as reasonable, most Chinese economists believe that growth of 5–6 per cent is more likely.

The debate has a lot to do with assumptions about China’s potential growth rate. Many models can be used to estimate the potential growth rate, but the simplest and most credible is the Solow model. Based on this model, a country’s GDP growth rate depends on the growth rates of its stock of net capital, its population size and its total factor productivity.

China’s population has now stalled and its capital growth depends on its national savings. On this count, China has an edge, with national savings accounting for 45 per cent of its GDP. China’s stock of net capital is 3.6 times its GDP and its depreciation rate is 5 per cent. This means that its annual savings translates into 7.5 per cent growth in its net capital stock.

GDP growth brought about by capital accumulation would be half of this, or 3.75 per cent. Previous studies have found that total factor productivity growth contributes 20–40 per cent of GDP growth. Based on this arithmetic, China’s potential growth rate in 2023 is in the range of 4.7–6.3 per cent, justifying Chinese economists’ forecasts.

But China faces several challenges along the way to achieving this potential growth rate in 2023.

The first is how the COVID-19 pandemic will continue to evolve. Chinese authorities lifted the country’s strict zero-COVID policy in early December 2022. Infections quickly peaked in most provinces but the travel and retail sectors bounced back soon after. The uncertainty is whether a second wave of infections will come in the spring and how severe it will be. Considering this uncertainty, we should not expect high rates of growth in the first two quarters of the year.

The Chinese government should make preparations for a second wave of infections. This includes promoting vaccination, increasing ICU capacity and shoring up medical supplies.

The second challenge is declining external demand. The bottleneck to growth of China’s economy is clearly on the demand side — on average, 20–30 per cent of production capacity is idle.

Over the past three years, the Chinese government has relied heavily on investment to boost demand. But the incremental returns on this investment are diminishing. Capital formation has at best contributed 2 percentage points to China’s growth in recent years.

Exports have made a significant contribution to sustaining China’s growth over the same three years. But as recession fears loom large across the global economy, external demand is likely to falter in 2023. China must shift to domestic consumption to generate enough demand to maintain its growth.

This leads to the third and toughest challenge for China’s growth in 2023. Before COVID-19, domestic consumption grew by a respectable 7 per cent most years. The share of GDP attributable to domestic consumption increased from 48 per cent in 2010 to 55 per cent in 2019. But over the past three years, domestic consumption has slowed. For China to reach a potential growth rate of 5.5 per cent in 2023, consumption growth will need to make up at least 3.5 percentage points of this. This would require consumption growth of at least 6.36 per cent, which is by no means an easy task.

Two factors will help boost consumption. One is the recovery of consumer confidence after the pandemic. This may help release the excess savings accumulated by households over the past three years. Judging by the quick recovery of the travel and retail sectors after the first wave of infections, there is reason to believe that consumption will bounce back in 2023.

The other factor is the stabilisation of the property sector. Due to government attempts to prevent overheating, the property sector underwent a large decline in 2022. The Chinese government began to reverse policy in late 2022 and is now encouraging local governments to support the sector. As a result, the property sector should stop its decline in 2023, and that will have a positive impact on consumption.

But those two factors may still not be enough to generate 6.36 per cent growth in domestic consumption. Chinese authorities have put boosting consumption as a top priority for 2023 and may roll out more policies with this as a goal.

Several local governments have issued coupons to help boost consumption. Consumption coupons are equivalent to price discounts and…

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Business

China Dismantles Prominent Uyghur Business Landmark in Xinjiang – Shia Waves

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The Chinese government demolished the Rebiya Kadeer Trade Center in Xinjiang, affecting Uyghur culture and commerce, prompting criticism from activists amid concerns over cultural erasure and human rights violations.


Demolition of a Cultural Landmark

The Chinese government recently demolished the Rebiya Kadeer Trade Center in Urumqi, Xinjiang, a vital hub for Uyghur culture and commerce, as reported by VOA. This center, once inhabited by more than 800 predominantly Uyghur-owned businesses, has been deserted since 2009. Authorities forcibly ordered local business owners to vacate the premises before proceeding with the demolition, which took place without any public notice.

Condemnation from Activists

Uyghur rights activists have condemned this demolition, perceiving it as part of China’s broader strategy to undermine Uyghur identity and heritage. The event has sparked heightened international concern regarding China’s policies in Xinjiang, which have been characterized by allegations of mass detentions and cultural suppression, prompting claims of crimes against humanity.

Rebiya Kadeer’s Response

Rebiya Kadeer, the center’s namesake and a notable Uyghur rights advocate, criticized the demolition as a deliberate attempt to erase her legacy. Kadeer, who has been living in exile in the U.S. since her release from imprisonment in 2005, continues to advocate for Uyghur rights. She has expressed that her family members have suffered persecution due to her activism, while the Chinese government has yet to comment on the legal ramifications of the demolition.

Source : China Demolishes Uyghur Business Landmark in Xinjiang – Shia Waves

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China

China Expands Nationwide Private Pension Scheme After Two-Year Pilot Program

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China’s private pension scheme, previously piloted in 36 cities, will roll out nationwide on December 15, 2024, enabling workers to open tax-deferred accounts. The initiative aims to enhance retirement savings, address aging population challenges, and stimulate financial sector growth.


After a two-year pilot program, China has officially expanded its private pension scheme nationwide. Starting December 15, 2024, workers covered by urban employee basic pension insurance or urban-rural resident basic pension insurance across the country can participate in this supplementary pension scheme. This nationwide rollout represents a significant milestone in China’s efforts to build a comprehensive pension system, addressing the challenges of a rapidly aging population.

On December 12, 2024, the Ministry of Human Resources and Social Security, together with four other departments including the Ministry of Finance, the State Taxation Administration, the Financial Regulatory Administration, and the China Securities Regulatory Commission, announced the nationwide implementation of China’s private pension scheme effective December 15, 2024. The initiative extends eligibility to all workers enrolled in urban employee basic pension insurance or urban-rural resident basic pension insurance.

A notable development is the expansion of tax incentives for private pensions, previously limited to pilot cities, to a national scale. Participants can now enjoy these benefits across China, with government agencies collaborating to ensure seamless implementation and to encourage broad participation through these enhanced incentives.

China first introduced its private pension scheme in November 2022 as a pilot program covering 36 cities and regions, including major hubs like Beijing, Shanghai, Guangzhou, Xi’an, and Chengdu. Under the program, individuals were allowed to open tax-deferred private pension accounts, contributing up to RMB 12,000 (approximately $1,654) annually to invest in a range of retirement products such as bank deposits, mutual funds, commercial pension insurance, and wealth management products.

Read more about China’s private pension pilot program launched two years ago: China Officially Launches New Private Pension Scheme – Who Can Take Part?

The nationwide implementation underscores the Chinese government’s commitment to addressing demographic challenges and promoting economic resilience. By providing tax advantages and expanding access, the scheme aims to incentivize long-term savings and foster greater participation in personal retirement planning.

The reform is expected to catalyze growth in China’s financial and insurance sectors while offering individuals a reliable mechanism to enhance their retirement security.


This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in ChinaHong KongVietnamSingapore, and India . Readers may write to info@dezshira.com for more support.

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How a scandal over sanitary pads is shaping feminist activism in China

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Chinese sanitary pad brands face scandal over misleading product quality and pH levels. Consumer outrage grows amid larger issues of women’s health neglect and activism for better standards linked to declining fertility rates.

A string of prominent sanitary pad brands in China have become embroiled in a scandal about the quality of their products. The controversy began in early November when consumers complained that that the advertised lengths of many sanitary pads were misleading.

Then, a few days later, customers discovered that many pads had pH levels similar to textiles such as curtains and tablecloths that do not come into frequent contact with skin, potentially causing irritation or harm to users.

The anger only intensified when ABC, one of the companies at the centre of the controversy, responded dismissively to concerned consumers. ABC emphasised that it was complying with national standards, and reportedly replied to a complaint with: “If you cannot accept it, then you can choose not to buy it”.

Chinese companies have since apologised for their sub-par products, and ABC has even said that it was “deeply sorry” for its “inappropriate” response. But for many women in China, this scandal is about more than just defective products. It is part of a troubling pattern in which women’s health and dignity is blatantly disregarded.

In 2022, Chinese women took to social media to advocate for sanitary pads to be sold on trains. Their demands were swiftly dismissed, with China Railway saying sanitary pads were “private items” that women should prepare for themselves in advance.

Some people on the internet echoed this sentiment, arguing that it was inappropriate and unhygienic to sell sanitary pads on trains. “You don’t want sanitary pads sold alongside food, do you?”, one wrote.

Remarks like this laid bare not only the stigma surrounding menstrual blood in China, where it is seen as polluting and shameful, but also the widespread ignorance among men about menstruation. This was again highlighted by one social media user who questioned absurdly: “Why can’t women just hold it in?” The recent scandal over poor quality sanitary pads is yet another chapter in this story.

The neglect of women’s basic needs in China has worsened with the government’s push for higher birth rates. China’s ruling Communist party began actively promoting higher birth rates in the mid-2010s after decades of limiting most families to one child. The push is driven primarily by the state’s concerns over an ageing population and a shrinking labour force.

Read more:
China’s doom loop: a dramatically smaller (and older) population could create a devastating global slowdown

This pro-natalist agenda, which has been bolstered by media campaigns urging women to prioritise marriage and motherhood, has pressured many to sacrifice their education and careers. In anticipation of having to provide paid maternity leave, employers also often discriminate in the processes of hiring and promotions.

Meanwhile, feminist advocacy faces censorship and suppression. This has included the shutdown of influential media platforms like Feminist Voices and the blocking of #MeToo-related hashtags. Activists have resorted to creative methods, such as using symbols like the “Rice Bunny” (a term that is pronounced “mi tu” in Chinese) emoji, to navigate strict surveillance and content filtering that targets discussions on gender equality.

Why the #RiceBunny hashtag has become China’s #MeToo.

Fighting for change

Women in China are now rallying for higher standards in the production and regulation of sanitary products. They are actively submitting comments via the government’s online platform for the public to provide feedback to standard setting officials.

On November 22, a representative from the organisation responsible for drafting the new standards stated that public feedback had been heard and will be considered in the process. However, this response is far from satisfactory. The same companies that produce sanitary pads in China are heavily involved in setting these standards.

Women’s active involvement in shaping the revision of national standards is reflective of a consistent strategy in which they use government-provided channels for political participation. Yet women in China have now also started to link the issue of low-quality sanitary products to broader societal challenges, including falling fertility rates.

In the 1970s, when China first implemented its one-child policy, over six children were born for every woman of childbearing age. This had dropped to an average of one-and-a-half by the 2000s. At the same time, there is a growing prevalence of infertility in China. A 2021 study published in The Lancet, a peer-reviewed medical journal, shows that China’s infertility rate rose from 12% in 2007 to 18% in 2020. One in every 5.6 Chinese couples of childbearing age faces challenges in conceiving a baby.

Throughout the recent sanitary pad scandal, hashtags such as #LowQualitySanitaryPadsCauseFemaleIntertility have spread across Chinese social media platforms such as Weibo. By aligning their grievances with national anxieties, feminist activists in China are strategically reframing their demands to align with state priorities.

Such an approach may, on the one hand, risk unintentionally reinforcing existing stereotypes about women and societal expectations. But it may also increase the likelihood of their concerns being addressed, as it presents better sanitary product standards as a critical public health and national concern rather than a “women’s issue” that can simply be dismissed.

Feminist activism in China looks to be growing in maturity. Narratives and strategies are now being carefully crafted to ensure maximum impact both in public and policy arenas.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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