China needs to boost productivity given 'demographic challenge,' says economist

China is facing a demographic occupation and needs to boost its productivity for growth, said David Mann, main economist for Asia-Pacific, Middle East and Africa astatine the Mastercard Economics Institute.

"You request to spot the productivity broadside pickup precisely due to the fact that of the demographic challenge," helium told CNBC's "Squawk Box Asia" connected Monday.

"If you spell backmost 10, 20 years successful China, you had truthful overmuch of maturation coming purely from conscionable much radical showing up each twelvemonth — that labour publication alternatively than superior oregon productivity."

"Now, you request the productivity," helium said, underlining Beijing has to marque definite "capital is channeled" successful a mode that boosts productivity.

China ended its Covid-19 controls successful December and the archetypal economical rebound has lost steam. The 6.3% economical maturation successful the 2nd 4th marked a 0.8% gait of maturation from the archetypal quarter, slower than the 2.2% quarter-on-quarter gait recorded successful the archetypal 3 months of the year.

The massive real property assemblage has struggled to recover, while exports person plunged due to falling planetary demand.

"The other situation China has though — dissimilar accidental adjacent determination that has a smaller colonisation — is astir numbers," said Mann.

"When you look astatine a colonisation of astir 1.4 cardinal people, adjacent if the moving property radical is shrinking, there's conscionable not capable radical retired determination to beryllium capable to practically marque that happen."

As a result, it's important for Beijing to promote backstage assemblage maturation to easiness the productivity pressures, helium added.

Mann explained a cardinal for the system would beryllium "how beardown we spot maturation successful the backstage assemblage — to beryllium capable to bring successful those innovations and present them successful a mode that does support maturation a spot stronger, without needing to resort, for example, residential existent property investment, which is not arsenic productive."

China is expected to merchandise its ostentation information Wednesday, which volition springiness further clues connected the country's betterment trajectory. Lackluster user request led to no alteration successful prices successful June. 

Domestic question has been a agleam spot successful the recovery. Urban residents much than doubled their tourism spending successful the archetypal fractional of the twelvemonth from a twelvemonth agone to 1.98 trillion yuan ($280 billion), according to the Ministry of Culture and Tourism.

There has been a recovery, "it's conscionable that radical — per idiosyncratic — are spending less," said Mann.

"With the question betterment domestically successful China, we've seen volumes of radical astir cardinal holidays up and matching and exceeding adjacent 2019 levels," helium noted. "But the per idiosyncratic spending has not been," starring to a somewhat "more tame recovery" successful user spending.

 — CNBC's Evelyn Cheng contributed to this report