China's tech independence, emissions drive could cut growth to 3% - S&P Global

FILE PHOTO: People eat lunch at a terrace restaurant near the CCTV building in the Central Business District (CBD) following an outbreak of the coronavirus disease (COVID-19) in Beijing, China, October 27, 2020. REUTERS/Thomas Peter

LONDON (Reuters) - China’s push to achieve technological self-reliance and become carbon neutral could see its economic growth halve to an average of 3% over the next decade, credit rating agency S&P Global said on Monday.

China flagged its aim to become technologically independent and achieve major breakthroughs in core technologies by 2035 on Thursday in a communique of the fifth plenary meeting of the Chinese Communist Party’s central committee.

It ensures the goal will be at the heart of the five-year plan for 2021-2025 to be issued next March, and along with an earlier commitment to become carbon neutral by 2060, “will be felt globally” S&P said in a new report.

“If China succeeds in pursuing these strategies, the global economy will undergo a fundamental realignment, starting now”.

For China itself “the price of greater self-reliance will, almost surely, be slower economic growth” the report said, as beneficial network effects of diverse supply chains would be stifled.

In a “downside scenario” where a sustained effort to achieve self-reliance saw, initially at least, a “less-than-stellar” return on the stepped-up investment required, China’s real GDP growth could fall to 3% on average between 2021 and 2030.

That would be less that half the 6-8% of recent years and below S&P’s current base case forecast for 4.6% growth over the next decade.

“A sustained decline in growth, lower than the consensus expects, may indeed be the price for self-reliance. We do not yet know if the government would be willing to pay it,” S&P said.

Reporting by Marc Jones; Editing by Kirsten Donovan