SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.
Could the Chinese economy really grow at less than 2.5% per year for the next 20 years?
Yes, because of very bad demographics and excessive indebtedness. We’ve been highlighting this risk since 2014, but it’s now at the center of mainstream thinking
The ICIS baseline scenario assumes that China’s 2022-2050 GDP growth will average 3.1% in 2022-2050. This would be a steep decline from the average real GDP growth of 9.2% over the period 1978-2021. 1978 is the beginning of our database.
The multiple of demand growth for the seven major synthetic resins relative to GDP in 1978-2021 averaged 1.6. As China’s economy and its polymer market mature, we expect this multiple to fall to 0.4 in 2022-2050. A dip below zero towards the end of the forecast period lowers the average.
You can see the impact of this base case for China polymer demand 2022-2050 in the graph from today’s blog post.
In the same chart, my highly unscientific downside is to reduce annual GDP growth to half of our baseline assumptions for 2022-2050. This leaves average GDP growth over the period at around 1.6%. I kept the same annual multiples of polymer consumption growth relative to GDP used for our base case.
The differences are, of course, breathtaking:
- Cumulative downward demand would total 5 billion to 910 million tonnes less than our base case.
- Assuming the rest of the world is unaffected by much slower-than-expected Chinese growth, global polymer demand growth between 2022 and 2050 would be 197 million tonnes below the decline. This would compare to 230 million tonnes in the base case.
- In the event of a decline, the cumulative global demand for polymers in 2022-2050 would be around 12.8 billion tonnes compared to 13.9 billion tonnes in the base scenario.
Editor’s Note: This blog post is an opinion piece. The opinions expressed are those of the author and do not necessarily represent those of CIHI.