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A global debt crisis, trade wars and a slowing China risk creating a new recession – even before the damage of the last one has been undone. Since 2012, Chinese GDP has grown at an annual rate of 6-8 per cent – weaker than in the pre-crisis period (growth peaked at 14 per cent in 2007) – but still strong enough to support the growth of the Chinese middle class and stimulate the economies of its major trading partners. The US recovery has been slow by historic standards but growth in 2018 (2.9 per cent) was buoyed by Donald Trump’s tax cuts, which dramatically inflated corporate profits. Japan’s growth has been low but stable – unsurprising in view of its rapidly falling population (which declined by 449,000 in 2018). Only the eurozone has continued to struggle, growing by just 1.8 per
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A global debt crisis, trade wars and a slowing China risk creating a new recession – even before the damage of the last one has been undone. Since 2012, Chinese GDP has grown at an annual rate of 6-8 per cent – weaker than in the pre-crisis period (growth peaked at 14 per cent in 2007) – but still strong enough to support the growth of the Chinese middle class and stimulate the economies of its major trading partners. The US recovery has been slow by historic standards but growth in 2018 (2.9 per cent) was buoyed by Donald Trump’s tax cuts, which dramatically inflated corporate profits. Japan’s growth has been low but stable – unsurprising in view of its rapidly falling population (which declined by 449,000 in 2018). Only the eurozone has continued to struggle, growing by just 1.8 per
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A global debt crisis, trade wars and a slowing China risk creating a new recession – even before the damage of the last one has been undone.
Since 2012, Chinese GDP has grown at an annual rate of 6-8 per cent – weaker than in the pre-crisis period (growth peaked at 14 per cent in 2007) – but still strong enough to support the growth of the Chinese middle class and stimulate the economies of its major trading partners. The US recovery has been slow by historic standards but growth in 2018 (2.9 per cent) was buoyed by Donald Trump’s tax cuts, which dramatically inflated corporate profits. Japan’s growth has been low but stable – unsurprising in view of its rapidly falling population (which declined by 449,000 in 2018). Only the eurozone has continued to struggle, growing by just 1.8 per cent in 2018.
But all is not as it seems. The US recovery has been highly unstable and unequally distributed, with loose monetary policy (interest rates are currently 2 to 2.25 per cent) required to sustain unremarkable growth rates, which have varied by almost five percentage points between the best- and worst-performing states. Real average American wages in 2018 had the same purchasing power as 40 years ago. Meanwhile, corporate debt has reached a record level (45 per cent of GDP) and stock markets still appear overvalued.
China’s growth has been driven almost entirely by its 2009 $586bn stimulus programme – one of the largest in economic history, which included public investment in high speed rail, airports and road upgrades – which has also underpinned growth in economies dependent upon Chinese demand for their exports (such as Germany). Brazil, Russia and South Africa – once heralded as part of the insurgent “Brics” economies – are all growing at annual rates of 1.5 per cent or less, according to recent figures.