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Having transited from a government-controlled economy to a market-based economy in 1990, China had been successively clocking double digit growth until a decade ago. China's economic miracle, however, appears to be gradually fading away in recent years, evidenced by a broad set of indicators - contraction and slowdown in its manufacturing industry - the mainstay of China's export-driven economy - rising prices, especially wages, leading to cooling of the real estate, increasing shrinkages in fresh investments and consumption, among others.

According to official data, China hit its weakest level of GDP at 6.7 percent in the last quarter of a century in 2016, raising concerns worldwide about the possibility of Global economy being negatively impacted by the continued slump in the Chinese economy. China, meanwhile, has been taking desperate measures - loosening of interest rates, currency manipulations, and credit-funding infrastructure projects, among other measures, in an effort to keep the economy afloat as also to create the semblance of economic stability. Worse, economic data released by provincial governments in China do not match up to the national aggregate, indicating serious chinks in China’s economic armour. What gives further credence to a ‘China slowdown theory’ is that investment banking research departments such as Bank of America – Merrill Lynch and Goldman Sachs, which generally tend to be positive on their clients, have begun to take more nuanced views of China’s economic growth lately.

Computing China’s real growth however has never been easy for outside economists, who in the absence of clean official data often rely on and co-relate other indicators to get a sense of where exactly is China headed. It was against background that Vivekananda International Foundation invited noted economist and former investment banker Dr. V. Anantha Nageswaran to lead a brainstorming session on the current state of China’s economy, held on 24 January 2017. The session was attended by a broad array of policy experts, including noted economist Surjit S. Bhalla among others.

In his opening remarks, General NC Vij, Director, VIF, flagged his concern that China’s continued economic downturn could well catalyze into social unrest, which also potentially could lead to further muscle-flexing on the part of China externally. The impact of China’s sluggish growth on its military spending and the potential re-shaping of US-China economic relations under Trump administration were a few among other highlights of General Vij’s opening remarks.

Dr. V Anantha Nageswaran, through his presentation, titled appropriately ‘China: Death By Thousand Debts (or) Till debt do us apart’, underlined structural flaws in the Chinese economy. He highlighted, among other things, China, in an effort to debt-fuel its economy has built over-capacity in infrastructure. With private investments hard to come by, the government has turned towards policy lenders in an effort to keep pumping cash into the economic system. He stressed China’s overall debt has risen astounding to almost 300 percent of its GDP over the past seven to eight years, the highest for any country in the world. With many of these infrastructure projects being economically unviable and very little assurance that these investments will pay off, lending institutions are staring at looming bankruptcy. He further stressed domestic investors in China, shaken by the country’s economic slowdown, are looking at ways and means to take their money out of the country. China’s capital outflow, exchange rates, currency manipulations, among other topics, figured prominently in the presentation.