China Narrowly Misses Q3 Growth Target

It must never be forgotten that China is a “planned” communist economy, ruled over by the People’s Party of China. The nation has become the second largest economy in the world as it flirts with, but never truly adopts, capitalism – one wonders what Chairman Mao would think… As such, official projections for growth and the near picture-perfect fulfilment of them must be taken with a pinch of salt.

The latest growth figure for Q3 has come in marginally lower than forecast at 6.5% instead of 6.6% (will somebody be heading for the political re-education camps, one wonders?). This is the weakest year-on-year growth figure since the end of the Global Financial Crisis, but still compares incredibly favourably with growth data from the rest of the developed world. Whilst significant GDP growth is “easy” to obtain from a small, developing economy, this level of expansion for the second largest economy in the world is quite staggering – the Chinese GDP was estimated at $12 trillion in 2017.

Despite the slight undershoot, the Chinese economy remains on target to achieve its full year goal of 6.5% expansion. However, the effects of US tariffs on Chinese exports to the US could exert a significant effect on figures as the effects start to bite. Economic data can lag geopolitical events because of forward purchases of goods and services which were not (then) subject to the tariffs.

For some years, China has wished to rebalance its economy to rely more on domestic demand for its growth than exports. However, China’s construction boom for housing, commercial properties and major infra-structure projects has left it with very substantial debt levels. It faces the problem of trying to deflate the property bubble without killing domestic production which could be choked off if interest policy was to become much less accommodative. If Chinese domestic demand was stronger, the threat caused by Trump’s aggressive trade policies would be mitigated.

Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.