Reuters/Fred Dufour
- China's economy may not ever outpace the US, according to Rockefeller International's Ruchir Sharma.
- China on Sunday set a growth target of roughly 5% for 2023, but didn't imply a great deal of fiscal stimulus.
- Sharma estimates that China's growth for the next decade could hover around 2.5%.
China's economy is facing headwinds that will keep growth low, and according to Rockefeller International Chairman, Ruchir Sharma, it may never surpass the US economy.
In an interview with CNBC, Sharma, who is also the chief investment officer of Breakout Capital, said China's breakneck pace of growth these last four decades is hitting a wall, and leadership in Beijing are coming up on a reality check.
"If you look at the biggest drivers of growth in China, it's now shrinking population, low productivity, and the fact that it's facing much stiffer competition on the export front with the US leading the charge in terms of restrictions and other sanctions," Sharma said.
China on Sunday announced a roughly 5% growth target, without implying much in terms of fiscal stimulus. It also set a goal of 3% for consumer price index, and a 5.5% jobless rate for city-based citizens.
China learned its lesson from attempts at fiscal stimulus and watching other countries do it, Sharma said, and juicing up the economy led to a "massive hangover" and trouble in the property sector.
A more realistic economic target, in Sharma's view, is half of China's target, and that low level of growth could linger well beyond this year.
"I think these numbers are a bit pointless, especially since they were announced by the outgoing administration there, there's a big change happening there," Sharma continued. "But the long-term picture is this - that the Chinese economy, given the demographics, and the debt and deglobalization headwinds that it's facing, I think it'll be lucky to grow at 2.5%."
He noted that China's growth last year of about 3% stemmed largely from being a rebound from a low starting point coming out of the pandemic, and the number seemed exaggerated.
"I think that the Chinese economy doesn't take over the US economy possibly ever. Even if it grows at 2.5%, given the exchange rate, I don't think in our lifetime we see the Chinese economy ever taking the US economy," Sharma maintained. "2.5% for this decade is my best guess."