Written By Basilio Chen

VN:F [1.9.16_1159]
Rating: 0.0/5 (0 votes cast)

To understand how the Chinese economy is doing now, it is important to look at it from a longer term perspective.  China growth for the past 30 years has been spectacular and especially since 1990’s and 2000’s has been stellar.

There is a obvious slow down at the moment since 2012.  The slowdown is partially due to government reforms however there are also in major part due to slowness in the export sector.  The export sector is being affected by slowing of foreign demand and also growing competition from countries with lower cost center than China like Indonesia and Vietnam that have attracted many corporate buyers away from China, Nike and Adidas to name a few.

From a longer term perspective, China overall economy has growth exponentially over the last 30 years propelled by the exporting of its low cost labor that would produce products for the develop markets, USA and Europe.  In addition, large foreign investment partly to participate in the industrial but more toward infrastructure development in China including early stages of large real estate development.

Propelled by a major movement of population from the small towns and village to the major cities and from inland provinces to more prosperous provinces, the migration has provided the initial large base of labor to provide for the last 30 years of the outsourced production and manufacturing demand.

China has 126 large state-owned-entities consisting of 117 large State-Owned-Enterprises (SOE’s) and 9 large State-owned banks and insurance companies.

Some doomsayers believe Chinese capital is leaving China because of a lack of confidence.  However, it is best seen as a major policy change and encouragement of Central government to promote outbound investment, a move that started as early as 2013 with further public announcements made by China’s Premier Li Keqiang.  The very large majority of Chinese capital adds to over $3.9 trillion just in foreign reserves of the Central government and large SOE’s and personal investable assets remains at over $10 trillion.  And while countries outside China are still in recession or slow growth including the USA, this asset base could be seen as productive for both regular and strategic growth outside China.

China is also not totally homogeneous now, there are provinces that slowing and there are others that are growing.  And in the international terrain, China is developing in all commercial and financial areas including the bold creation of the Asian Infrastructure Investment Bank (AIIB).