There’s now no questions that the Chinese economy is slowing. Some of the concerns and criticism, however, are misplaced. This story has been well telegraphed, and it’s a long-recognised trend. The Chinese authorities intended to move into a slower growth rate, they intended to change the growth pattern from an investment-led growth to a consumer-led growth.
In some ways, they are having some success with that. Services are growing faster than the industrial sector, and they are now a biggest contributor to the country’s GDP. Therefore, there is a transformation going on. It might be a bit of a bumpy road, as it is never a linear process to move to slower growth.
In China, there’s always been a great desire for stability; from politics to the economy. The economy is moving more to markets now, and sometimes market forces cause a bit of instability. But control is not lost by any means.
The rest of Asia will be moving to slower growth because of the slowdown of the Chinese economy. Many Asian countries will have to change their models and aim to benefit less from the Chinese economy in the future. Reform initiatives have to be implemented.
The only worrying indicator in China right now is the debt-to-GDP. Debt is increasing and, coupled with a slower growth, the debt-to-GDP is rising fast. In the past, the Chinese economy used to “grow” itself out of such issues, but that appears to no longer be feasible.
