A leisurely pace ...
Dragons are powerful symbols in Chinese culture. Of late, though, there has been little to be seen of this thousand-year-old legend – at least when it comes to the economy. That’s because cracks have recently developed in the notion of China as an eternal engine of economic growth. In 2018 gross domestic product (GDP) expanded by only around 6.6 per cent, the lowest rate in some three decades. The previous year it had been 6.9 per cent. This is all the more dramatic given that the wellbeing of the Middle Kingdom is of huge importance for the global economy, if only due to its sheer size and weight in global trade. The prospects for 2019 are also cloudy: at its most recent annual conference, the Chinese People's Congress confirmed the growth target of 6.0 to 6.5 per cent that had been rumoured in the media. The question now is this: will China’s economy reach its low point this year?
... but a rapid reaction
Beijing would not be Beijing if it were not to react quickly to the situation. Just as it did in the last crisis in 2015, the government has bundled together a package of measures, providing for a cut in the tax burden, among other elements. The key areas are the reduction in VAT rates and in social taxes. These are thoroughly positive decisions, because they underline that the country is keen to strengthen private enterprise and consumption. In addition, infrastructure investment is to be stepped up and small businesses are to be given easier access to bank lending. This shows that the government is doing all it can not to disappoint in its medium-term growth target of 6.5 per cent for the years up to 2020. View more information on investment solutions on the topic “China: The dragon returns”.
Opposition from the USA
US president Donald Trump bears a share of the guilt for the current dip in growth of the Middle Kingdom. He provoked a quarrel with Xi Jinping by accusing China of unfair trading practices and the theft of intellectual property. The two biggest economies in the world then began to clobber each other with high punitive tariffs. As a result of the conflict with the USA, the world's top exporter is trying to get its domestic market into better shape. The country has just attracted attention for an unusual step in this regard: in order to stimulate consumers’ willingness to spend, they can not only take off 1 May, Labour Day, but stay on holiday until 4 May. There are also signs of an agreement in the trading dispute, with reports suggesting that the two sides have come much closer together. US media anticipate a deal at the end of April.
The big picture
For years China was regarded as the workbench of the world, but the Middle Kingdom would like to leave this reputation behind once and for all. To achieve this, the government has set itself a bold target: in 2049, the 100th birthday of the People's Republic, China is to be the world’s leading industrial nation. To get there, Beijing has brought an ambitious plan into being: “Made in China 2025”. It provides first and foremost for the increasing automation of production. That deeds follow words is demonstrated by the sale of robots. Although the People's Republic is still only in 23rd place on an international comparison, with 68 cyborgs per 10,000 employees, nowhere else in the world is the robot density rising as fast as it is in the Middle Kingdom. The International Federation of Robotics (IFR) expects Chinese factories to buy four in ten of the robots produced across the world in 2019. The country is also seeking to expand trade with other continents through its “new Silk Road”. This plan, too, is taking shape: just recently, Italy and president Xi Jinping signed declarations of intent worth billions of euros for the gigantic infrastructure project.
View more information on investment solutions on the topic “China: The dragon returns”.
China GDP growth
