Five keywords due to define China’s economy in 2019

24/01/2019

Last year, China’s GDP hit the 90-trillion-yuan mark for the first time, growing by nearly 8 trillion yuan in a year and what’s next?

 

The West would like to change China, but is China that is changing the world. Nowadays PRC is arise again as superpower, from the “factory of the world” to the world forerunner. After the end of Cultural Revolution, nobody could imagine that China could sit again on the same table of world’s superpowers. Today PRC is the second economy in the world, finch and hi-tech leader and so far from utopist dream of Chairman Mao.

Last year China marked  40 years of economic reform and in 2019 is ready to celebrate its 70th anniversary. Here are five keywords that can define both the achievements and changes of China’s economic performance in the future.

 

1. Cross-border e-commerce

PRC leads the world in e-commerce. Today, more than 40% of whole online transactions take place in China. One decade ago, PRC’ s e-commerce transactions count only 1%. China e-commerce is much more than simply a means for consumers to secure bargains on everyday purchases. It is an important driver of economic and social development that is powering transformational change across the country.

As Jack Ma stated at the 2018 World Economic Forum Annual Meeting in Davos: ”No-one can stop globalization, no-one can stop trade.” And it’s true. As WTO recently underlined, one of the greatest indications of the role e-commerce plays in driving globalization is the amount of cross-border e-commerce between China and the rest of the world.

In the west, when Amazon acquired Whole Foods Market, everyone speculated how  combined those two firms : an online brand with a brick and mortar one in order to produce a new generation of digitally-connected retail. Well, that future has already arrived in China years ago.

 

2. Hi-tech: no more world’s factory

As People’s Daily stated, China’s GDP growth hit a new low of 6.6 percent in 2018, its lowest since 1990. However, both the quality and efficiency of the country’s economy were improved.

The service sector accounted for 52.2% of the country’s total GDP. Additionally, value added by the high-tech manufacturing industry increased by 11.7 percent last year, accounting for 13.9% of industrial enterprises above the designated size. The figure was even higher in some coastal areas and in clusters such as Chengdu, Shenzhen, Beijing or Shanghai.

To be more specific, China’s high-tech manufacturing industry, emerging strategic industries, and equipment manufacturing industry saw growth of 11.7%, 8.9% and 8.1%, respectively.

 

3. Supporting Private sector

Chinese government is highly active to continue its reforms. Beijing will support private sector too. As PM Li Keqiang stressed “our intention is to support the growth of the private sector, especially SMEs, helps enhance the internal dynamism for economic growth,” Li said.

Beijing understood that due to boost the private sector of the economy and micro and small businesses, it is crucial to create a level-playing field, especially in property protection and market access, for these businesses to compete in a law-based, neutral environment.

The private sector in China, which is mainly composed of SMEs accounting for 90% of all businesses, now contributes more than 50% of tax revenues, over 60% of GDP, more than 70 percent of technological innovations and over 80% of urban employment. The private businesses have become a key driving force for economic growth and social progress.

 

4. Investments

According to People’s Daily, China’s fixed-asset investment (FAI) grew 5.9% year-on-year to nearly 63.6 trillion yuan in 2018. 39.4 trillion yuan of the total FAI came from private investment, up 8.7 %, 2.7 percentage points higher than 2017. Director of the Institute of Research at the Ministry of Finance Jia Kang recognized this 8.7% growth in private investment. However, he pointed out that given the downward trend of investment growth, investment from the government and state-owned sectors must have also experienced a downturn.

This growth was expected to be lower than 5.9%, he added. Non-private investment can unleash potential, and China has already done an excellent job in the positioning and necessary adjustment of its macro policies, such as proactive fiscal policies, as well as its adequately managed monetary policies. “It is necessary for China to further expand its domestic market through investment”, Jia added.

 

5. Lower tier & Consumption

new law for cross-border e-commerce - xi'an - cifnews

In the not-so-distant future, more than half of the rich Chinese will be in cities we’ve never heard of, that’s why is important to understand which are the raising markets. Today lower-tier cities are the new foundation of the Chinese economy and, of course, consumptions. Government statistics have always been at the forefront of telling the story of China’s urban reality.

It’s estimated that by 2022 there will be a 56% increase in consumption in urban areas and the middle class will constitute about 54% of the Chinese resident population in the cities. In 2018, China’s total retail sales of consumer goods stood at nearly 38.1 trillion yuan, up 9% from 2017. Final consumption contributed 76.2 percent to China’s GDP growth, 18.6 percentage points more than in 2017.

The slight decrease of resident income and the transition from consumption of goods to services were the primary reasons for the slowing growth of total retail sales of consumer goods, explained Wang Qing, the chief macro analyzer of a Chinese credit rating agency. In 2018, consumer spending in urban areas rose 6.8%. This opposing trend suggests a rapid increase in residents’ service consumption.

 

 

 

 

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