CHINA’S SLOWING GROWTH RATE – PLANNED FOR

In Club News by Stephen Perry

This headline is an amalgam of the headlines that are around at the moment.
Here are the real numbers, provided by Professor Danny Quah of the L.S.E. :

QUOTE
 
10 years ago the USA added to the world economy 139% more than China.
China’s slowdown today?
China will add 39% more to the world economy than the USA.
 
ENDQUOTE

China’s New Normal growth is greater than the total size of the Chinese economy a few years back.

China’s current lower growth rate was contemplated back in 1978, when Deng and his colleague , Chen Yun, brought up to date the plan for economic development first put forward by Premier Zhou in 1963.

They contemplated three phases:

1. Low cost export driven at the same time as moving the peasants to urban life, followed by:

2. A managed market economy at the same time as moving forward to the final phase of creating large scale agriculture and replacing the peasant class by an agricultural, industrial and service working population.

3. The third phase – Common Prosperity – will come in during the 2030’s. It will be a move to an economy which is adequate for the vast majority of the population. It will sit within an Asia which shares in prosperity across borders, and trades and invests with the global community on an equal basis. It would hope to be part of a global community that cares for each other’s well-being.

While abbreviated for reading purposes, the growth moves from nominal to 10pc in the first phase, from 10 to 6-7pc in the second, and then reduces to 3-4pc . Finally moving to what is needed to enable a reasonable sustainable life style for the people of China.

War and natural disasters can throw the phasing and the numbers.

China’s current challenges are the challenges of change and a mix of the expected and the unexpected. But they are geared to address them both. For 38 years they have been confounding those who predict negative outcomes.

Whilst not wanting to ignore current challenges, as they affect many policies that influence national and international policies, they are not threatening nor fundamentally a signal of an economy out of, or veering towards being, out of control. We should study the problems and the rectifying policies for their impacts.

Stephen