We live in a world of spin where any fact, figure, opinion or statement can be altered to appeal to what the Spin Doctor thinks their audience wants to hear. Growth in the Chinese economy has been phenomenal since the Chinese Communist party started its flirtation with capitalism. It is easy to forget that China is still a single party state and highly authoritarian when it chooses to be.
The Shanghai stock exchange was closed down when the Communists came to power in 1949 and only reopened 26 years ago, in 1990. Its opening was inauspicious, hitting an all-time low of 99.98 points in December 1990. Its peak saw values rocket to 6092 points in October 2007, prior to the Global Financial Crisis and it currently stands at 2859 points. The economy has averaged growth of an astounding 9.4% between 1978 and 2012 (this includes the Global Financial Crisis period!). In terms of actual value, it has grown from a low of $46.7 billion in 1962 to stand at about $10.3 trillion in 2014.
The headline is that China’s economic output has slowed to its weakest growth since the Global Financial Crisis, but the fact remains that economic output is still growing despite sluggish global demand and the evils of a weak crude oil price. The rate of expansion of the sector rose by 5.4% in January and February. Whilst it is true that the pace of growth has slackened, the Chinese economy is the second largest in the world. On its own, the Chinese economy is roughly half the size of the whole EU – if manufacturing output across the EU were to rise by 5.4%, national holidays and street parties would probably be organised!
If there is room for concern about China it is probably more over the reliability and impartiality of the economic data that it produces rather than the idea that the economic juggernaut is expanding less quickly than before. It is surprising how often Chinese growth seems to hit its targets, or narrowly fails to do so – Chinese economic crystal balls are clearly market leaders.