Tuesday, September 13, 2016

Economy: Don`t Underestimate China

(Drivebycuriosity) - If we believe the media China is about to crash. But the reality refutes the gloomy predictions. Quite contrary,  the recent economic data suggest that the Chinese economy is gaining traction again.

This morning we learned that the Chinese retail sales grew 10.6% in August, faster than in July (plus 10.2%). The charts below suggest that the slow down of the Chinese economy has come to an end (source tradingeconomics ). Growing retail sales are a sign that China´s consumer spending, the motor of the domestic economy, has bottomed out.

Today we also learned that China`s Industrial production accelerated as well (tradingeconomics). Another sign that China is managing the hoped soft landing which should foster the global economy.

 I am not surprised. The huge country is still in the begin of a secular catching-up process which is fueled by extreme income & wealth differences to the US and other Western nation values. Today China has about $7,500 income per capita, the US number is  $54,600 (worldbank). And: China is transforming into a modern economy, helped by the technological progress. People are flooding into the big cites. The rapid urbanization creates millions of jobs and is driving income growth for the whole nation. Swift rising incomes are fueling the economic growth of China. This economic environment makes a China crash highly unlikely.

PS for illustration I chose an image of Chinese top model Danni Li as an example for the modern China.

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