US protectionism towards China risks a “new forever war” with a mistake of historic proportions, warns economist Stephen Roach.

He cited International Monetary Fund (IMF) data which showed that China’s contribution to global growth fell from over 30% in 2010-19 to 24% in 2020-23. It is expected to drop to 21 percent between 2027 and 2029.

Roach has been outspoken about his gloomy predictions for China and Hong Kong’s economic growth in recent months. In February, Roach’s opinion piece, “It Pains Me to Say Hong Kong is Over,” received backlash, and he defended his position by saying it was a ” alarm signal “. Weijian Shan, chief executive officer of investment company PAG, wrote in an opinion piece in the South China Morning Post in April that many Hong Kongers eligible to live elsewhere have not moved, and that this reflects of their confidence in the city.

In his remarks Friday, Roach said his shift in views on China’s economy had occurred over the “last year or so,” with the main reasons being the weakening of China’s total factor productivity. China and “deep-rooted concerns” about deteriorating Sino-U.S. relations. from bad to worse in recent years.

“My view is certainly more cautious today than it was then, and in fact, more cautious right now regarding China’s future than it was been at any time in 25 years,” Roach said, speaking to a room of diplomats and journalists at an event in Beijing organized by the Center for China and Globalization (CCG).

“China therefore remains the most powerful engine in the world. But the engine power decreases. And the idea that we talk about China as being, on its own, enough to account for more than 30 percent of global growth – needs to be rethought,” he said.

Roach, now a professor at Yale, added that China has similar “structural problems” as Japan did in the 1990s and early 2000s, including a housing crisis and an aging population that peaked more earlier than expected.

China’s latest move to save the real estate sector by setting aside 300 billion yuan ($41.4 billion) to convert excess inventory into affordable housing is still “a step too small”, although it is This is a step in the right direction, Roach said.

“The only way to maintain rapid economic growth is to offset demographic headwinds with increased productivity growth. Japan has not been able to do it and I worry about China’s ability to do it,” he said.

07:43

From economic ‘miracle’ to cautionary tale: Japan’s development and recession

From economic ‘miracle’ to cautionary tale: Japan’s development and recession

Wang Huiyao, founder of the CCG think tank, in a dialogue with Roach at Friday’s event, said that while the speed of China’s economic growth may decline, “the quality may improve” as China transitions from “high-speed economic growth”. to high-quality development.

Roach questioned the basis of such an argument, pointing to China’s declining total factor productivity (TFP).

The economic indicator, which measures the growth rate of how efficiently an economy uses capital and labor, increased by about 22 percent between 2003 and 2011, and then by just 5 percent between 2011 and 2019, according to a 2022 IMF report.

“You can’t have high-quality growth with low TFP,” Roach said.

To boost China’s economy, Roach said there should be a shift in the mix of economic support “from a low-productivity private sector (state-owned enterprises) to a higher-productivity private sector, particularly state-owned enterprises technological”.

On Sino-U.S. relations, Roach said China’s comparative advantage in producing new energy products should not have been achieved last month with U.S. President Joe Biden’s proposed tariff increases on electric vehicles. Chinese, lithium-ion batteries for electric vehicles, battery parts and solar cells.

“I think there is a huge strategic mistake driven by election year politics in the United States,” he said, adding that Biden could delve “even deeper into a new forever war ” in terms of trade with China.

“Taking a protectionist stance against a country like China – which has a comparative advantage in producing alternative carbon-free energy products that a world grappling with climate change desperately needs – is a mistake, potentially of historic proportions. » said Roach.

“I see no sign that President Biden is going to rethink this approach if he is re-elected at the end of this year,” he added. “And I also don’t think we can count on (former US President Donald Trump) spontaneous relief on the US-China trade front.”