Over the past few weeks, China’s economy has caused shock waves throughout the global economy, with data released on Tuesday confirming it has grown at its slowest rate in a quarter of a century in 2015.
With the growth rate falling to 6.8% from 7.3% a year earlier, analysts express concerns of the health of the world’s largest economy. This concern is not shared by all however, with the Hong Kong-based analyst at Nomura Holdings, Gordon Kwan, more optimistic;
“China’s GDP growth is not collapsing, even though the fourth-quarter figures are slightly lower than expectations.”
The fall in China’s growth has seen impacts throughout he rest of the world. The International Monetary Fund expects the drop in growth to have a direct knock on the 2016 global growth rate by 0.75%. On a national scale, the UK’s chancellor of the exchequer George Osborne has warned that China’s slower growth adds to the new “dangerous cocktail of new threats” to the British economy.
A factor towards the slower growth rate in the Chinese economy is due to the Chinese government’s wish to move the towards an economy led by consumption and services, rather than one driven by exports and investment. This transition has not been smooth, with critics claiming China should focus on productivity for higher growth;
“While higher consumption can support growth in the short run, there is little in economic theory that emphasises the expenditure side of GDP as a driver of growth,” said HSBC’s John Zhu.
Chinese consumers’ are picking up the slack however, where consumption accounted for two-thirds of growth in gross domestic product (GDP) last year. This consumer growth can be seen in recent figures from Apple and Starbucks, both of which have been thriving and will continue to do so. Fore example, Apple has doubled its revenue from the country for the quarter ended September to $12.5 billion, and is hoping to increase its number of Chinese stores from 28 to 40 mid-year.
International companies are not the only one’s who have seen an increase in sales within China’s slowing growth. The Kweichow Moutai Group, a national liquor, has seen its sales revenues rise by 4 percent year on year from January to November and sales revenues reaching 7 billion yuan (5.5 billion U.S. dollars) in the first 11 months of 2015.
Despite figures showing consumer growth, not all remain positive for China’s economy. Andrew Polk, an economist at the Conference Board industry-research firm has said that companies are relying on wealthy and middle-class customers for expansion, but as China’s economy slows, so will the growth of their customer pools.
Safiya Bashir on 19/01/1016
