BANGKOK (NNT) – China’s will close its e-commerce services in Indonesia and Thailand, retreating from Southeast Asia after a bruising year for China’s retail and technology sectors.

Local websites showed will end its services in Thailand from March 3 and in Indonesia from the end of the same month. Both units will stop taking orders on February 15.

A spokesperson for said in a statement on Monday that the company will continue to serve global markets, including Southeast Asia, through its supply chain infrastructure.

The company, which did not give a reason for the closures, started its e-commerce operation in Indonesia under the name JD.ID in 2015 as a joint venture with Provident Capital, while the Thai platform was launched two years later with the kingdom’s largest retailer Central Group.

However, failed to gain traction against larger players such as Alibaba Group’s Lazada, Sea Ltd’s Shopee and GoTo Group’s Tokopedia.

The company, which also runs the omni-channel retail brand Ochama in Europe, said in November that “new businesses” – including units abroad as well as other ventures such as JD property – accounted for just 2% of total revenue in the third quarter.

In China, the company, like many of its tech peers such as Alibaba, has been battling a slowing economy and the impact of strict curbs, which have prompted cost cutting and worker layoffs.

While has performed better than its peers, posting an 11.4% rise in third-quarter revenue, its chief executive has described the second quarter as the most difficult one since listing in 2014.

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Southeast Asia is home to several promising industries across its regional economy that will report quicker than the global average growth in 2023. Despite a concerning macroeconomic backdrop, various factors will continue to pull in investment and businesses to the region.

Southeast Asia, or the ASEAN (the Association of Southeast Asian Nations) region as more commonly referred to in Asia, is among the fastest-growing regions in the world. According to the Asian Development Bank (ADB), economic growth in Southeast Asia reached 5.5 percent in 2022.

However, a host of evolving and generally negative economic pressures is pushing down the growth forecast for the region by ADB – reflecting patterns elsewhere in the world – to 4.7 percent.

The International Monetary Fund (IMF) forecast for global growth was 3.2 percent for 2022 and 2.7 percent for 2023, meaning ASEAN is still forecast to grow substantially faster than the global average.

Despite the prevailing gloomy economic climate, Southeast Asia remains very attractive to foreign direct investment (FDI), and several industries look set to prosper in 2023. Trends of capital inflow into key sectors, such as tech, manufacturing, and infrastructure development, will likely continue while China’s ‘reopening’ will provide a much-needed boost for tourism and travel from the second quarter (Q2 2023).

ASEAN growth trends

The region is on course to become the world’s largest single market by 2030. This is reflected in the investment flows that have continued at a high level in recent years. ASEAN states are becoming increasingly open to international trade having incrementally removed barriers to inter- and intra-regional trade and investment.

The growth of Southeast Asia’s indigenous economies also offers a lucrative environment for foreign businesses, as also the sheer size of the regional population and workforce. ASEAN countries have a total population of 662 million people and a combined gross domestic product (GDP) of US$3.2 trillion.

Map of Asean Countries
ASEAN countries have a total population of 662 million people and a combined gross domestic product (GDP) of US$3.2 trillion.

Growth patterns will be boosted as economies and workforce arrangements become more formalized and more young people enter the labor market. The median age in Southeast Asia is 30.2 years, substantially less than in China (38.4) and Europe (44.1).

Finally, the ASEAN region has benefitted, and will likely continue to benefit, from a privileged geopolitical position. An intensifying rivalry between superpowers, the US and China, have prompted both nations to deepen their ties with the region.

China has considerable links with ASEAN economies and seeks to enhance them through increased infrastructure spending and by improving access to trade, such as through the Regional Comprehensive Economic Partnership (RCEP).

What are the promising industries for Southeast Asia in 2023?


There are clear challenges for the region’s manufacturing sector in 2023. We’re seeing downward pressure on demand across the world, predominantly in advanced economies, which will impact manufacturing activity in the ASEAN states.

Other challenges include rising interest rates, which increase the cost of borrowing and therefore growth, and inflation, which puts pressure on margins at a time when demand is already under pressure.

Manufacturing is an important part of the regional economy. In some countries, this dependence on manufacturing is more pronounced – in Vietnam, it is the backbone of the economy, and in Thailand – the sector contributed 27 percent of GDP in 2021.

However, there are several reasons to believe that capital inflows into manufacturing in the region will continue in 2023. For one, ASEAN-made goods are generally considered more cost-effective than those made in China, primarily due to factors such as labor costs, leading to the growing shift to ASEAN.

In addition to lower labor costs, the US-China trade war has forced many China-based manufacturers to move part of, and in some cases, all of their supply chains to Southeast Asia.

Chasing this ‘China Plus One’ or ‘China Plus Many’ strategies, ASEAN governments have issued preferential incentives and enabling policies to capitalize on this shift in regional supply chains. This includes implementing tax cuts, increasing the ease of doing business, boosting infrastructure spending, and offering incentives in special economic zones and free trade areas.

Vietnam has been one of the largest beneficiaries of the China Plus One strategy in recent years, with the manufacturing sector attracting some 58 percent of total FDI in the country in 2020 alone.


Since the start of the pandemic, the tourism sector has faced challenges across ASEAN states. It plays an important role in several of the region’s economies and is also one of the key areas of ASEAN cooperation since the establishment of the association.

Thailand was the most-visited ASEAN state, welcoming nearly 40 million visitors in 2019. It was the first country in the Asia Pacific to initiate the reopening to international tourism back in July 2021 with its Phuket Sandbox program. However, while 2022 data is yet to be finalized, visitor numbers remain significantly down over the pre-pandemic era. It is understood that around 10 million people visited Thailand in 2022.

Vietnam’s tourism sector has been struggling too. The state will likely have welcomed 3.5 million tourists in 2022, a mere 18 percent of the 19 million international arrivals in 2019.

However, there are several reasons to expect 2023 to be a more positive year for the sector. First among these is China’s ‘reopening’ to travel. The Chinese immigration authority recently announced that it would resume issuing visas for mainland residents to travel overseas from January 8. A lack of Chinese tourists had been seen as the predominant challenge for the sector in most ASEAN states.

Another reason is returning demand for tourism elsewhere in the world. US households are continuing to unleash two- or three years’ worth of pent-up demand as Covid-19 fears wane according to data shared by CNBC. The Asia Pacific is among the most popular destinations.

Demand for travel is continuing in Europe, despite inflationary challenges, while airlines are increasing routes and injecting more supply.

Further, ASEAN states have also developed programs to attract foreign arrivals, such as the digital nomad visa program in Malaysia, and Indonesia’s second home visa scheme. Indonesia has set an ambitious target of attracting 7.4 million foreign tourists for 2023, almost double that recorded in 2022.

Digital economy

The digital economy across the ‘ASEAN-6’ (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam) is expected to reach a gross merchandise value (GMV) of US$200 billion by the end of 2022, according to a report from Google, Temasek and Bain & Company. This is expected to reach a GMV of US$330 billion by 2025.

Over the past three years, the region saw the emergence of 100 million new internet users. In many countries around the world, internet adoption was enhanced by the pandemic as the virus restrictions placed on socializing and public activity impacted offline shopping and entertainment, etc.

Tech start-ups are well-represented in Southeast Asia’s booming start-up ecosystem. According to a recent UNCTAD report, the number of start-ups in ASEAN that have raised more than US$1 million in funding almost tripled to 1,920 between 2015 and 2021. The growth rate is 85 percent greater than in Europe and 65 percent faster than in the US.

The digital transformation agenda continues to be a major driver of investment and growth in the region. Importantly, the expanding digital economy offers huge opportunity scope in the area of digital financial services.

The majority of Southeast Asia’s population is still unbanked or underbanked and the majority of workers are in the informal sector, thus lacking bank accounts and making it difficult for banks to build a credit history.

Further, MSMEs in the region also lack formal credit histories hindering their access to capital. This is crucial as MSMEs make up the backbone of most ASEAN countries. Fintech companies can plug this gap by issuing microloans that have terms and maturity which are small and short – borrowers can receive as little as US$100, which can be disbursed within 24 hours.

ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in SingaporeHanoiHo Chi Minh City, and Da Nang in Vietnam

About the author

ASEAN Briefing features business news, regulatory updates and extensive data on ASEAN free trade, double tax agreements and foreign direct investment laws in the region. Covering all ASEAN members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam)


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The Ministry of Finance is maintaining its economic growth outlook for 2023 at 3.8%, helped by a rebound in tourism and domestic demand, but exports are still expected to slow down this year.

Pornchai Thiraveja, head of the ministry’s fiscal policy office, told a briefing that the Thai economy likely expanded 3.0% in 2022, down from a previous forecast of 3.4%, as exports, public investment and private consumption slowed.

Official gross domestic product (GDP) figures for 2022 are due to be released next month. In 2021, GDP grew 1.5%, among the lowest rates in the region.

Pornchai also noted that the tourism sector has been picking up steadily as the world relaxes international travel measures.

Tourism rebond

The tourism sector started rebounding last year with 11.15 million foreign tourist arrivals.

Since the new year began, Thailand has booked 1.34 million foreign tourists.

Pornchai added that the kingdom is expected to receive 27.5 million foreign arrivals this year, up from 21.5 million projected earlier, helped by China’s reopening.

5 million Chinese visitors this year

The government is projecting at least 5 million Chinese visitors this year, about half of the figure in pre-pandemic 2019.

Overall foreign tourist arrivals reached a record of nearly 40 million in 2019, with spending at 1.91 trillion baht (US$58.07 billion). Tourism accounted for about 12% of GDP.

Exports to grow only 0.4%

However, exports – another key driver of growth – could increase just 0.4% this year, rather than rise 2.5% as projected earlier due to a global slowdown.

The ministry meanwhile predicts the baht to average 32.5 per dollar this year after 35.07 last year, as Thailand is among the countries expected to see a continued economic recovery.

Headline inflation expected at 2.8%

Pornchai said average headline inflation is expected at 2.8% this year, down from a 24-year high of 6.08% last year, which was far above the Bank of Thailand’s target range of 1% to 3%.

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The recent surge of optimism that the world economy would have a soft landing is largely due to China’s decision to ditch its “zero-Covid” policy. Clearly, the reopening has lessened the risks and uncertainty surrounding the outlook.

China’s real GDP increased by 3% overall in 2022 from the previous year, which was the second-worst performance since 1976, the final year of the Cultural Revolution (the worst being 2020, when the pandemic began).

The earlier and faster than expected ending of zero-Covid restrictions in China bodes well for the global economy and adds to the recent run of positive news. But how significant will the spillovers from China’s policy likely be for Thailand and the global economy?

At Davos, Chinese Vice Premier Liu He held a private meeting with leading Western business leaders. One leader quoted Liu as saying that “China is back.” There is a widespread expectation that, once the current outbreak of COVID-19 in China recedes, the Chinese economy will accelerate significantly.

Serious headwinds for China

However, there are serious headwinds for China that could restrain the recovery. These include the troubled property market, weakness of external demand, poor demographics, and efforts by Western governments to restrict trade and cross-border capital flows with China, according to a Deloitte analysis.

Stronger service demand will have some beneficial spillover effects on the rest of the world, especially in terms of outbound tourism, but Asian tourist destinations like Thailand and Japan are expected to benefit more than manufacturing hubs and commodities producers. However, given the slow global growth, tourism isn’t anticipated to boost the economy quickly enough.

Prior to the pandemic, 28% of Thailand’s 40 million tourists were from China. While private consumption makes about 50% of GDP, tourism accounts for 12% of the economy and a fifth of jobs.

We’re sceptical that China will save the world from recession, and we don’t think the likely increase in Chinese demand justifies recent moves in prices for metals and other commodities.

Ben May, Director of Global Macro Research at Oxford Economics

Moreover, despite being beneficial to global GDP, the reopening of China could result in a rise in global inflation, according to Christine Lagarde, president of the European Central Bank (ECB). According to her, “the change of this Covid policy will revive the economy. That is positive for the rest of the world, but there will be more inflationary pressure.” 

Overall, China’s exit from its zero-Covid policy is positive news for the world economy, but we don’t think it is a gamechanger. China’s policy shift is unlikely to prevent the global economy falling into recession, while at the same time it’s unlikely to push inflation around the world onto a significantly different path.

Ben May, Director of Global Macro Research at Oxford Economics

Thailand, whose economy is strongly reliant on tourism, lost out on tens of billions of dollars’ worth of Chinese visitor spending during the past three years.

In 2019, Thailand welcomed 11.5 million Chinese visitors out of a total of 39 million international arrivals, of which about 4.3 million were from group travel. Tourism receipts from Chinese travelers represented 531 billion bahts in 2019, a significant part of the 1.9 trillion total.

As a result of wooing visitors with longer-term visas, the kingdom is thought to have received at least 11.15 million foreign tourists in the previous year, above the initial estimate of 10 million, and has subsequently raised its target to 25 million visitors for 2023.

25 million foreign visitors this year

Thailand, one of Asia’s most popular tourist destinations, is expected to receive at least 5 million Chinese tourists and a total of 25 million foreign visitors this year, providing a much-needed boost to an economy severely impacted by the global pandemic.

Bookings for international travel for the Jan. 21–27 Lunar New Year holidays increased more than fivefold, according to, a significant provider of travel services. However, that was an improvement from the previous year, when China’s borders were closed to the majority of foreigners and subsequently prevented Chinese citizens from traveling abroad.

According to the Chiang Mai office of the Tourism Authority, the city, which is well-known for its significant reliance on tourism, will welcome back nearly 600,000 Chinese visitors this year who will spend about $230 million, or roughly half of the total from 2019.

However, just a handful of Chinese visitors were posing for photos and basking in the sun this week in the market and plazas near Chiang Mai’s ancient Tha Phae Gate, one of many tourist hotspots still waiting for millions of Chinese travelers to return, according to an AP report.


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BANGKOK (NNT) – Commerce Minister Jurin Laksanawisit and EU Trade Commissioner Valdis Dombrovskis announced that the two sides have agreed to relaunch negotiations for a free-trade agreement (FTA) between Thailand and the European Union, with both sides aiming to complete the talks within the first quarter of this year.

Jurin described the meeting as “historic” as it was the first time that political representatives of both sides agreed to relaunch free-trade talks. He will now seek the Cabinet’s endorsement to resume trade talks, while Dombrovskis will seek approval from the EU’s 27 member states.

This marks a significant step forward for Thailand, which has been seeking an FTA agreement with the European Union for almost 10 years. Negotiations for the FTA were first launched in March 2013 but were put on hold the following year.

If the resumed talks lead to an agreement, Thailand will become the third ASEAN country to have an FTA with the EU, after Vietnam and Singapore.

EU is Thailand’s fourth-largest trading partner

The EU is Thailand’s fourth-largest trading partner, after China, the United States, and Japan. Last year, bilateral trade between Thailand and the EU totaled 1.3 trillion baht (US$41 billion), accounting for 7% of Thailand’s total trade.

Thailand’s exports to the EU last year totaled 843.3 billion baht, with key export products including computers, computer equipment, and components, gems and jewelry, air-conditioners and components, rubber products, chicken, and electronic circuit boards.

Also in 2022, Thai imports from the EU totaled 594.2 billion baht, with major import products including machinery and components, pharmaceuticals, chemicals, electrical machinery, and tools.

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Rewriter : Paphamon Arayasukawat

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BANGKOK (NNT) – In 2022, Thailand saw a significant increase in foreign visitors, with a total of 11.15 million people traveling to the kingdom. This was a significant jump from the previous year, when just 428,000 visitors were recorded due to pandemic-related travel restrictions.

According to data from the Ministry of Tourism and Sports, the figure exceeded the government’s expectations and marks a strong recovery for Thailand’s vital tourism industry, which had been heavily impacted by strict entry and quarantine policies during the pandemic.

2.24 million foreign tourists in December

There were 2.24 million foreign tourists in December alone, compared to 230,497 in the same month the year before.

Before the pandemic, Thailand saw a record high of nearly 40 million foreign tourists in 2019. The top three source markets for tourists last year were Malaysia, India, and Singapore.

25 million international visitors in 2023

Thailand is aiming to attract 25 million international visitors this year, with a focus on attracting at least five million visitors from China. To support this goal, the government has approved a budget of 3.95 billion baht (120.72 million US dollars) to boost domestic travel and international tourism in secondary cities.

China’s reopening boost

The reopening of China is expected to further boost Thailand’s vital tourism sector, which before the pandemic accounted for about 12% of the gross domestic product in Southeast Asia’s second-largest economy.

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  • Reporter : Paphamon Arayasukawat
  • Rewriter : Paphamon Arayasukawat
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The Bank of Thailand maintained its strict monetary policy to control inflation on Wednesday by raising its benchmark interest rate by 25 basis points to 1.5%, the highest level since September 2019.

Recovery in tourism expected

The Thai economy will continue to gain traction with continued recovery in tourism and private consumption thanks to the return of Chinese tourists. Meanwhile, merchandise exports will slow down this year but are expected to improve in 2024 in line with the global economic recovery.

Headline inflation expected to decline

Headline inflation is expected to decline, whereas core inflation remains at a high level with increased risks from demand-side inflationary pressures due to the economic recovery. The Committee deems that a continuing gradual policy normalization is an appropriate course for monetary policy consistent with the growth and inflation outlook, and thus votes to raise the policy rate by 0.25 percentage point at this meeting.

Thai economy is projected to continue growing

The tourism sector will exhibit a faster recovery following the return of Chinese tourists. This will contribute to a more broad-based improvement in employment and income of services sector and self-employed workers, which account a significant share of total employment. Such improvements will support the continued expansion of private consumption.

Overall financial system remains resilient

Commercial banks maintain high levels of capital and loan loss provision. Debt serviceability of households and businesses has improved in line with the economic recovery. However, the financial positions of some SMEs and households remain fragile and sensitive to the rising living costs and debt burden.

The Committee views that financial institutions should continue to press ahead with debt restructuring and deems it important to have targeted measures and sustainable solutions in place for vulnerable groups.


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Businesses owners on Phuket Island are eagerly anticipating the long-awaited arrival of Chinese tourists in the hopes that China’s reopening and the removal of its stringent travel restrictions will help to restore their ailing enterprises.

Before the pandemic, Chinese tourists, who formerly accounted for a quarter of a trillion dollars in yearly global travel spending, made up about a third of Thailand’s visitors.

Watersports businesses, which offer paragliding, water skiing, and other activities, suffered heavy losses during the pandemic, when strict entry conditions and long mandatory quarantine periods kept visitors at bay.

Thailand is expecting at least five million Chinese tourist arrivals this year

With tourism picking up widely in the region from pent up demand and the end of most travel curbs, Asia’s holiday hotspots are welcoming the return of Chinese tourists, who are celebrating the Lunar New Year.

The government is expecting at least five million Chinese tourist arrivals this year, with 300,000 in the first quarter.

Given that Phuket generally draws a fifth of all visitors to Thailand each year, the island is anticipating a much-needed financial boost from the inflow of Chinese tourists.

With its economy almost entirely dependent on tourism, many Phuket businesses were crippled by the pandemic.

More to come with resumption of group travel to Thailand

China will allow the resumption of overseas group tours to 20 countries, including Thailand, from February 6.

The Chinese authorities have given their approval for group tours and “flight + hotel” services in 20 countries. In addition to Thailand, these are Indonesia, Cambodia, Maldives, Sri Lanka, Philippines, Malaysia, Singapore, Laos, United Arab Emirates, Egypt, Kenya, South Africa, Russia, Switzerland, Hungary, New Zealand, Fiji, Cuba and Argentina.

As much as 7-8 million expected for the whole year

Chinese tourist arrivals are expected to start rising sharply in the second quarter of this year and could reach 7-8 million for the whole year.

According to a recent study by the University of the Thai Chamber of Commerce, this could raise the overall number of foreign immigrants to between 26 and 27 million.

In 2019, Thailand welcomed 11.5 million Chinese visitors out of a total of 39 million international arrivals, of which about 4.3 million were from group travel. Tourism receipts from Chinese travelers represented 531 billion bahts in 2019, a significant part of the 1.9 trillion total.

Sources : National News Bureau :, China allows resumption of group travel to Thailand – Thai News (


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Thailand has launched its first digital free trade hub in partnership with Alibaba, as the country looks to upgrade its logistics and e-commerce sectors.

The hub is a free trade area in Thailand’s Eastern Economic Corridor (EEC) designed to facilitate cross-border e-commerce between Thailand and China. The Thai government developed the hub in partnership with the Chinese technology giant as part of the latter’s Electronic World Trade Platform (eWTP), an initiative to promote international e-commerce.

If successful, the digital free trade hub will allow consumers in Thailand and China to buy products from each other’s markets more easily and quickly. The launch of the digital free trade hub is part of Thailand’s efforts to position itself as one of Southeast Asia’s key logistics centers for trade and e-commerce.

What is the digital free trade hub?

The digital free trade hub, sometimes referred to as the Smart Digital Hub, is a zone of 40,000 square meters that benefits from special rules for Thailand-China cross-border trade.

The hub is populated by bonded warehouses storing Chinese products to be sold in Thailand, as well as warehouse housing Thai products to be shipped to Chinese consumers who buy them through Alibaba’s platforms.

The hub offers both expedited customs procedures and physical proximity to expedite trade. In a bonded warehouse, a dutiable Chinese product will be stored in Thailand. Planners designed these warehouses to be fully automated.

E-commerce orders from China to be reduced from 10 days to three days

Taken together, planners say that the amount of time needed for Thai consumers to receive cross-border e-commerce orders from China will be reduced from 10 days to three days. If successful, expedited shipping will make Chinese products more appealing and more accessible to Thai consumers.

In a statement, Song Juntao, secretary general of eWTP, said that the hub marks the successful replication of China’s cross-border e-commerce model. Over the last decade, this model has grown in popularity in China as it allows consumers to rapidly receive international purchases through bonded warehouses located on Chinese soil.

From plan to reality

The digital free trade hub came into operation on December 8, 2022. It gained extra international attention following its launch when Alibaba’s founder, Jack Ma, visited the country in January 2023, making a rare public appearance.

The project initially began in 2018 when Ma signed four Memoranda of Understanding with the Thai government on trade, investment, and support for e-commerce and tourism. Alibaba and the Thai government previously signed a letter of intent in 2016 to cooperate on e-commerce.

At the time, Alibaba committed to investing 10 billion baht (US$302.8 million) to develop the hub. It was originally supposed to be fully operational by 2019, but its launch was delayed, including by the COVID-19 pandemic.

Alibaba launched the first international hub under the EWTP initiative in Malaysia in 2017 with a focus on developing a logistics hub by the Kuala Lumpur International Airport. Within China, Alibaba has also established eWTP partnerships in Hangzhou, Yiwu, Hainan, and Hong Kong.

Read the rest of this story here :

Thailand Opens First Digital Free Trade Hub in Partnership with Alibaba (

ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in SingaporeHanoiHo Chi Minh City, and Da Nang in Vietnam.

About the author

ASEAN Briefing features business news, regulatory updates and extensive data on ASEAN free trade, double tax agreements and foreign direct investment laws in the region. Covering all ASEAN members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam)


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China is undergoing a demographic transition that implies downward pressure on labour supply and economic growth over the coming decades.

Based on the latest data from the National Bureau of Statistics, mainland China’s population fell 850,000 to 1.41bn in 2022 – the first decline in 60 years. The number of births fell to a new low of 9.6mn in 2022, down from 10.6mn in 2021, and was outpaced by the 10.4mn deaths recorded in 2022, up from 10.1mn in 2021, partly related to Covid infections.

Worsening demographics will be a drag on potential growth

We expect China’s falling birth rate will continue to weigh on growth in the working age population (15-64 years old). The working age population had already peaked in 2015 and then declined by an average of 0.1% per year during pre-pandemic years to 2019. What’s more, the labour participation rate has also been falling since 2015, exacerbated in recent years by the pandemic and the zero-Covid policy.

Even though we anticipate a modest recovery in the labour participation rate as the country reopens and activity normalises, this won’t fully offset the effects of the demographic shift on growth of the working-age population over the medium to longer term. We forecast China’s working population will contract 0.2% per year this decade, down from +0.1% per year in 2010-2019 (Chart 2).

China’s working age population will shrink over the decade

Consequently, the decline in labour supply growth will deepen in the coming decades. We forecast the contribution of labour supply to GDP growth will be a net drag of -0.1ppts this decade and -0.3ppts the next, as opposed to the +0.2% contribution seen in the decade through 2020 (Chart 1).

And while we envisage that the pace of decline in China’s working age population will likely not be as rapid as our projections for Japan (-0.7%), the dependency ratio has nonetheless been rising similar to Japan’s, which will increase the economic and tax burden on the shrinking labour force (Chart 3).

A rising dependency ratio will burden a shrinking labour force

As China faces these strengthening demographic headwinds, this will leave GDP growth reliant on continued heavy levels of investment and a relatively rapid pace of productivity growth. However, the decline in returns on investment (particularly in traditional infrastructure, real estate, and heavy industries with overcapacity) and the retreat of investment growth from very high levels will reduce the contribution of capital accumulation.

Moreover, given the backdrop of technological decoupling from China by advanced economies and an ongoing diversification of supply chains away from China, we expect only modest total factor productivity growth in the future.

Consequently, China’s economy looks set to enter a structural slowdown. We forecast GDP growth will slow to an annual average of around 4.5% this decade, down from 7.7% per year in 2010-2019.

Source : Oxford Economics


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