Is The Chinese Engine Starting To Sputter?

For years, the Chinese economy showed growth in its gross domestic product (GDP) that was second to
none: 7-, 8-, even 9-percent growth every year; digits of which Western economies could only dream.
Even the so-called experts — this means analysts, whatever that means — predicted further growth.
They were all wrong!

Well, in the first quarter of 2013, the growth rate “dropped” to 7.7 percent; this is still a
world-class result, in spite of all the moaning of some analysts. Some even wrote of
disillusionment in China “following the many signs of a sustained economic recovery.”

For the new Chinese government leaders, these figures could be — let’s say — an unpleasant
surprise, but definitely not more than that. The problem for the Chinese officials is always the
same: they publish some ambitious figures, and if they don’t achieve them, the world is screaming.
However, the situation is not easy: The targets are set and the world is carefully watching every
Chinese step.

Officials from China’s National Bureau of Statistics have said that the economic situation
has not fundamentally changed. They are confident about the future growth prospects and optimistic
to reach the targets set for 2013. On the other hand, it was also mentioned that the economic
policy of the new administration is heading toward stable but sustainable, quality growth.

Another factor, which is widely known in the textile industry, is often forgotten when
analysts make their predictions about China from their office desks after collecting dry data: With
the increasing wealth of the Chinese population, its domestic consumption is growing too. The
statistics bureau indicated that domestic consumption is permanently gaining importance as a driver
for growth. It contributed 56 percent to the GDP, and it will further increase. The investments in
this sector account for 2.3 percent of the growth, and foreign trade accounts for only 1.1 percent.

In addition, as these figures are interpreted, a change is taking place toward a more settled
Chinese economic model with a stronger promotion of consumption and a reduction of the dependence
on investments only. Is the Chinese engine starting to sputter? Not really — maybe it’s just a
signal that the Chinese should realize that there is always a limit, even in growth.

April/May/June 2013