The world’s major growth engines are about to run in reverse. The policies and uncertainties of US President Donald Trump’s second administration have hit a sluggish global economy with a transformational exogenous shock. Risks are especially worrisome in both the United States and China, which have collectively accounted for a little more than 40% of cumulative global GDP growth since 2010.

Global GDP is likely to shrink again in Q2. Inflation will rise, and real pain will start to set in. Key industries will be disrupted, dragging down production and consumption. The United States may miss its growth target for 2025, and as a new cross-Atlantic trade war looms, growth may slow in the eurozone as well.

China's leadership has acknowledged the need to prioritize consumption and foster entrepreneurship, but these goals require deeper systemic reforms and a bolder embrace of risk-taking to reignite growth and confidence in the economy.

China’s GDP growth slowed during the first three quarters of 2024, from 5.3% to 4.7% to 4.6%, raising fears that the country would not achieve its annual growth target of around 5%. But the latest data suggest that China’s economy is finally turning the corner.

China’s engineering prowess has been nothing short of extraordinary. From world-class infrastructure and eco-friendly cities to space systems and high-speed trains, China’s impressive accumulation of state-of-the-art physical capital has played a dominant role in driving its economy. But China’s physical engineering accomplishments on the supply side have not been transferable to social engineering efforts on the demand side, especially in stimulating consumer demand.

In March, Chinese Premier Li Qiang announced an ambitious economic growth target of 5% for 2024. In a subsequent commentary, former World Bank chief economist Justin Yifu Lin endorsed the government’s target, predicting that China’s economy will grow at an average annual rate of 5-6% over the coming decade before slowing to 3-4% between 2036 and 2050.

Contrary to recent forecasts by various international organizations, the author believes that China’s economy in 2024 will buck the trend and trace a new curve. Growth will reach upward toward 5 percent and beyond in 2025 as the country shakes off the lingering impact of COVID-19 and returns to an appropriate range.

The only way to ensure more robust and sustainable growth is creating new patterns and new productive forces. Following the San Francisco Vision, the governments and business communities of both China and the United States should lose no time getting on board.

In March 2022, the Chinese government set a target of 5-5.5% GDP growth for the year. At the time, such growth levels appeared perfectly attainable. But within a month, the Omicron variant had arrived, triggering strict lockdowns that, while stemming the spread of the coronavirus, caused serious damage to the supply and demand sides of the economy. China’s growth rate for 2022 was just 3%.

China will stay on a positive trajectory this year, but its achievements did not come easily. Some fundamentals still need to be addressed, as the foundation underpinning the recovery is not yet rock solid. Boosting incomes would make a difference.