China : Slower growth, but healthier economy

 

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For those worried about the domino effects of a slowing Chinese economy, Premier Li Keqiang’s report on government work may be a mixed blessing.

By lowering its 2015 growth target to “around 7 percent”, the government has apparently given in to the intensifying downward pressures. Which may seem particularly unsettling alongside last year’s 7.4 percent, already a 24-year low.

As Li acknowledged in Thursday’s report to the National People’s Congress, economy-wise, the country may face even greater difficulties this year than in 2014.

Indeed, none of the key indicators of economic health look as inspiring as they used to. Many foretell harsher times ahead.

But the state of the Chinese economy is far less gloomy than it is in doomsayers’ eyes. Even after the dramatic slowdown from the rapid double digit growth of previous decades, 7 percent will still be decent enough in a global context.

Decent speed remains crucial for China, because of its daunting regional disparities and population base. Which is why Li keeps emphasizing a “reasonable range”.

But just like the government’s decision to stop using GDP growth as a yardstick for evaluating the performance of local leaders, speed alone should no longer be the sole concern in evaluating the country’s economic well-being.

Double-digit growth was certainly impressive. But the disparity between speed and quality came at a cost. Severe haze and other omnipresent signs of pollution and ecological degradation are only one aspect of its negative side effects.

The new leadership’s rhetoric about a new normal should not be simply taken as adapting to the new reality of slower growth. As Li’s report demonstrated, it is more about maneuvering for healthier development, and that is balancing the speed and quality of growth.

While the past mode of growth has shown its conspicuous downside, the Chinese economic locomotive is far from running out of steam. Those predicting a coming “collapse” of the Chinese economy are wrong because they have substantially underestimated its strategic depth and inner flexibility. The other side of the coin regarding the striking disparities in the Chinese economic landscape is the existence of abundant new growth points.

Urbanization, for instance, will create new consumers by the millions. This year, Li pledged, the government will help more than 10 million rural residents become part of the urban population. That presents additional demand.

Not to mention such initiatives as encouraging small and micro businesses, improving services, increasing disposable incomes, and boosting security guarantees.

As long as the momentum is sustained, the price of the present slowdown will prove worth paying.

 

 

Source : China Daily | March 6, 2015

Thomas D’Innocenzi

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About thomasdinnocenzi

Thomas D’Innocenzi is a highly accomplished, results-focused international consultant with extensive experience in global sourcing and business development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global marketing and sourcing operations. He has extensive experience in international business development to accommodate rapid growth. Skilled in building top-performing teams, bench-marking performance, and developing organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. Tom founded Nova Advisors with the mission of providing expert Global Business Development consulting services for companies seeking to expand their market share as an independent consultant. Tom has a network of experts and advisors throughout the Asia-Pacific region and North America. His expertise includes business development, global sourcing, manufacturing, commodities, logistics, QA/QC, FDA, regulatory compliance, sustainability, and supply chain optimization. Tom is experienced in the medical device, apparel, consumer goods and technology services verticals helping companies advance their global sourcing capabilities and develop new markets through a local and sustained approach. Located in SE Asia and the United States, Tom expands market reach to drive sales. His global sourcing strategy includes directly negotiating with commodity suppliers, supply chain networks and distributors for optimal terms based on his expertise and first-hand knowledge of the players. Contact Tom to use his consulting service to increase your global market and make global sourcing profitable for you in the Asia Pacific Region and the United States. http://www.NovaAdvisors.com thomas@NovaAdvisors.com USA Direct: +1.904.479.3600 SINGAPORE: +65.6818.6396 THAILAND: +662.207.9269
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