China’s GDP is now 66% of US GDP, down from 76% in 2021

The full implications of China achieving a 2.5% growth rate are still being comprehended, even in Beijing. A key consideration is that if the U.S. grows at 1.5%, with comparable inflation rates and a stable exchange rate, China might not surpass the United States as the world's largest economy until 2060, or possibly not at all.

Long-term economic growth relies on increased labor, enhanced capital utilization, and improved efficiency (productivity). China, confronted with a diminishing population and declining productivity growth, has sustained growth by injecting capital into the economy at a pace that may not be sustainable.

Currently categorized as a middle-income country, China is at a stage where economies often naturally decelerate due to a higher base. Its per capita income stands at $12,500, one-fifth of the U.S. figure. Among the 38 advanced economies today, all surpassed the $12,500 income level in the post-World War II decades, with most experiencing gradual growth. Only 19 achieved 2.5% or faster growth for the subsequent decade, mainly fueled by an expanding workforce. China stands out as the first large middle-income country to sustain 2.5% GDP growth amid a declining working-age population, a trend that commenced in 2015 and is anticipated to contract at an annual rate of nearly 0.5% in the coming decades.

Furthermore, China faces a significant debt challenge. Among the 19 countries that sustained 2.5% growth after reaching China's current income level, the average debt (including government, households, and businesses) was 170% of GDP. China's debt levels are considerably higher, reaching 220% of GDP by 2015. While debt binges typically lead to a sharp economic slowdown, China's economy experienced a more moderate deceleration in the 2010s, declining from 10% to 6%, which is less severe than historical patterns would suggest.