(Drivebycuriosity) - If we believe the media, China is in a deep mess.
Western media, banks, hedge funds and many pundits are drawing a gloomy
& racist picture of the "people`s republic". China skeptics - including New York
Times columnist Paul Krugman - have been banging the "China-will-crash-drum" for years. But the reality disproves the gloomy
predictions. Last night we we learned that the Chinese retail sales jumped 9.8 % year-on-year in June, faster than in May (plus 8.6% ). This
is the strongest retail growth since May 2018 (chart below source ).
China's industrial production accelerated to a growth rate of 6.3% year-on-year in June 2019,
following a 5.0% rise in the previous month and beating market
consensus of a 5.2% gain (industrial).
The numbers prove that the huge country is continuing her secular catching-up process, which is
fueled by extreme income & wealth differences to the US and other
Western nation values. Today China has about $8,800 income per capita, the US number is $59,500 (worldbank).
China doesn`t have much commodities but it owns
a huge amount of human capital: 1.4 billion people who are intelligent,
who work hard and save a lot money to achieve a better life. Wikipedia
counted in 2014 already "2,236 colleges and universities, with
over 20 million students enrolled in mainland China" (wikipedia). The fast expanding knowledge is driving science & innovation, raising productivity and fostering economic growth (washingtonpost).
Chinese corporations, think tanks & administrations can employ a
large number of highly dedicated & educated people - a strong driver
of economic growth (scottsumner).
China`s growth is fueled by a rapid transformation process. The country
is transforming from an industrial & export-focused
economy into 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 is on the way to became a modern economy. Many peasants are
moving to the huge
metropolitan centers which are spread all over the huge country to lift
their standard of living. This creates a fast rising affluent middle
class, giving consumer spending a boost as the strong retail sales
demonstrate.
China´s growth gets tailwinds from the technological progress and
advances of Internet, automatization of industrial production and
3D-printing. These developments raise efficiency and productivity of
China´s economy. It seems that China`s economy also is getting tailwinds
from fresh stimulus measure: In January Beijing announced tax cuts “on a
larger scale” in order to
boost business activity and The People's Bank of China injected more
money into the market via a targeted cut of the reserve requirement
ratio.
The swift retail growth is raising China´ s importance for the
global economy, which is increasingly fueled by Chinese imports. The
consumption power of 1.4 billion Chinese population becomes more and
more the growth engine of the global economy.
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