China’s GDP Continues to Grow

Overview

For the second quarter of 2016 China has beaten economists’ predictions for GDP growth. While the level has stayed the same as the first quarter, coming in at 6.7%, beating out the marginally lower prediction of 6.6% is still positive news.

Article Highlights

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Despite this continuous level of growth, there has been significant pressure upon the economy. Certain sectors are seeing declining levels of growth in terms of investment, particularly infrastructure and manufacturing which saw a drop to its lowest rate since the turn of the millennium. However, it is still growing, at a rate of 9%, and while the trend appears to be concerning the warning sirens won’t be going off for a long time yet.

The latest news regarding the GDP of China in the second quarter of 2016 has had many experts surprised. Many had predicted at the start of the year the country would struggle significantly, but the economy model changeover appears to be much smoother than initially thought. While most still have a pessimistic attitude towards the long term economy, this latest news is helping ease fears seen in other areas. However, many believe the figures to be deceptive, pointing towards the slowdown in private sector fixed-asset investment, which had dropped to a growth level of 2.8% in June, a 1.1% drop when compared to the average 3.9% seen in the first 5 months of 2016.

Factory Working in China

The manufacturing industry in China is becoming less important.

This area of reduced growth should not be one that will concern the Chinese government, as the trend would have been predicted due to the changing economy model. The rise of China has been due to being able to offer cheap manufacturing exports across the world, a model that is not sustainable over the long term. However, with rising levels of disposable income across citizens, the nation looks to increase reliance on services as well as goods consumption. Therefore, because this will transition is moving away from manufacturing, it should be expected that investment in the manufacturing industry will decrease.

Further evidence that supports this is the trends seen within the retail industry sector within China. Retail sales were up a significant 10.6% in June when compared with the previous year, exceeding the predicted 10% increase. The services industry as a whole accounted for almost a 57% contribution to the country’s GDP in the second quarter, with the manufacturing industry falling to as low as 37.5%. This record high by the services industry is underlining the importance this industry continues to be to China’s economy.

Summary

The economic environment globally is feeling the pressure. While improvements have been seen since the financial crisis in 2008, the general feeling is that there is still much further to go. China has been a surprising emerging economy throughout this whole time, outshining all other countries, resulting in significant focus being placed upon the nation’s economy. With the nation seeing declining growth levels, they are still in a strong position with an actively involved government who are aware of the issues at hand, but furthermore aware of the importance of carefully managing the future.

If you would like to learn more about the industry sectors within China, you can find a comprehensive article within our very own trade wiki here. This may help provide you with a higher level of depth and context of this article.

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