Since deciding to flirt with capitalism, the Communist Chinese economy has enjoyed spectacular growth albeit from an originally low base. Clearly, the concept of a communist nation embracing capitalism (to any extent) is a contradiction in terms that would have Marx and Lenin spinning in their graves, however the experiment has seen China’s GDP per capita nearly increase by a factor of sixty since 1978 (from $153 to $9830 in 2013). Whilst this has lifted many Chinese out of poverty, the nation is still plagued with extreme poverty, particularly in rural communities – something that Chairman Mao would have been less than delighted with, perhaps. 6.1% of the population currently lie below the poverty line with annual incomes below $3630 – about 81 million people.
The target for Chinese growth for 2014 was 7.5% but it was widely expected that growth would undershoot this target, largely because of weak demand in importing countries. Many analysts expected growth to come in at (a still impressive) 7.2%, but figures just released show that growth came in at 7.4%. Remarkably, this is the first time in 15 years that a growth target has been missed (paint me cynical…) and the worst economic performance in 24 years.
The other major economies hope that increased consumer spending in China will allow them to tap into an immense market – the population of China is 1.3 billion. Therefore, the news that Chinese retail sales enjoyed an 11.9% increase in December over the November figure will be welcome. Factory output saw a 7.9% monthly rise in December. The central bank sought to stimulate the economy in November by cutting its interest rate to 2.75% (still vastly higher than rates in most other leading economies).
Asian stock markets responded positively to the economic data with the Shanghai Composite index up by 1.8% and the Hang Seng rising by 0.9%.