Saturday, January 2, 2016

Economy: China - Gaining Speed Again

(Drivebycuriosity) -  If we be believe the media then China is about to crash. But the facts show that China`s economy is managing the transition and its economy is gaining speed again. On New Year´s Day we learned that the non-manufacturing PMI rose to 54.4 in December from 53.6 in November (marketwatch). This is the best number in 2015 (chart below  tradingeconomics). The barometer covers services including retail, aviation and software as well as the real-estate and construction sectors. Numbers above 50 mean growth and this rise shows that China´s service growth is accelerating.

Yesterday we also heard that China`s manufacturing PMI rose to 49.7 in December from 49.6 in November. This index suggest that the manufacturing sector is still shrinking, but slower than in the month before. The stronger service sector is overcompensating the weakness in manufacturing because the non-manufacturing sector has accounted for the bigger part of China's economic output for at least two years( Reuters).

In December we also learned that the Chinese retail sales grew 11.2 % in November after 11.0% in October (bloomberg reuters). This was the fourth acceleration back-to-back and the best retail number for this year. Since April the retail sales have been trending stronger. I suppose that the service sector benefits from swiftly climbing wages (tradingeconomics) and the advance of the Internet in China, especially from the rapidly growing e-commerce. There also are tailwinds from cheaper oil & other commodities. Consumers have more money to spend and companies less costs.

The accelerating services show that China´s economy is right on track. The country is transforming from an industrial & export-focused economy to a modern system like the US, where most of the GNP is fueled by consumer spending. In the US consumer spending is the engine of the economy. China, which still depends too much on exports & industrial production, is on the way to became a modern economy.

PS For illustration I choose the image of the model Sun Fei Frei from the cover of Vogue China that I found @ Google Image. I think that Sun Fei Frei represents the  China of the 21st century.

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