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China Shifts Gears: From Demand to Supply
11 Apr
Summary
- China prioritizes supply-side management over demand stimulus.
- Recent wage growth for urban workers has slowed significantly.
- The nation is transitioning towards a data-driven economy.
China's economic policy is undergoing a significant transformation, moving away from demand management towards a focus on supply-side improvements. This strategic shift, outlined in its latest Five-Year Plan, signals a departure from previous stimulus measures.
Policymakers in Beijing are now directing support towards the technology sector and industrial innovation. This approach contrasts with earlier strategies that prioritized wage growth and infrastructure investment, which fueled consumption and economic expansion.
Evidence suggests a slowdown in wage increases for urban private-sector workers, with growth falling below 1% by the end of 2025. This subdued domestic demand may contribute to China's ongoing large trade surplus.
The nation is transitioning towards a data economy, emphasizing advancements in technology over traditional investments like bridges and highways. This new focus implies a continued reliance on export markets to absorb production.
