Rebalancing mainland China's economy is a priority
A slowing of the mainland's economic growth below the psychologically important level of 7.0 per cent would outwardly appear to be a cause for concern. But there is nothing bleak about the latest quarterly figure of 6.9 per cent, which is above analysts' expectations and still within official estimates. Nor should it be of excessive concern for other governments, counting on the Chinese economy to help drive sluggish global growth. Expansion of the services sector and domestic consumption show that structural changes are having an impact and, with sustained effort, look set to spearhead a turnaround.
Not since the height of the global recession in 2009 has Gross Domestic Product fallen so low. The year-on-year growth rate had been expected to be an even lower 6.8 per cent for the third quarter, with exports, investments and property sales in decline. Overcapacity in the industrial sector and weak global demand, confirmed by the key indicator of electricity consumption being down 0.2 per cent in September, puts the total figure in perspective. Yet a closer look at power use gives a positive outlook, with consumption for industrial purposes down 1.0 per cent in the first three quarters, while up 7.3 per cent for services - which accounted for 51.4 per cent of GDP.
As encouraging is the growth of retail spending on consumer goods, up 10.9 per cent last month, 0.1 percentage points more than in August. A sustained boost in domestic consumption would help drive a mild recovery of GDP in coming months. Coupled with rising demand for services, the outlook for the middle to long-term would be bright. That is good for China, but it is also what the world needs.
Ensuring Chinese spend more at home requires improving the quality of goods and services. Structural reforms of the economy are having an impact, yet need to run deeper. The breakneck growth of the past three decades has ended and the goal now has to be manageable, sustained growth. Rebalancing the economy is a priority of officials when they begin meeting on Monday to draft the 13th five-year plan.