Why there’s no reason to be bearish about China’s slowing economy – just look at the big picture

Those disappointed by China’s economic data need to put the facts in perspective, as higher income levels go hand in hand with lower growth rates

Industrialising the rest of China’s huge rural labour force will provide enough momentum for productivity gains in the years ahead

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A woman chooses fruit at a supermarket in Huaibei, in China’s Anhui province. China, already at the upper range of middle-income economies, is expected to break into the “high-income” category by 2023. Photo: Reuters

Published: 11:00pm, 21 Aug 2019Updated: 3:15am, 22 Aug 2019

China’s economic growth rate has been disappointing for those who had anticipated a strong upswing. However, many analysts and commentators have focused on China’s slowdown but ignored the enormous size of the economy and the various implications.

Anyone who wants to understand the Chinese economy must first deconstruct their analysis into two distinctive components: structural and cyclical.

Structurally, China’s natural rate of economic growth has been falling for years, as the size of the economy has grown larger. This year, China’s per capita GDP is set to surpass US$10,000, based on current dollar rates.

Income levels are still low compared with those of advanced economies, where average GDP per capita is anywhere between US$40,000 and US$60,000, but we should also remember that only 20 per cent of the world’s population lives on more than US$10,000 per year.

The World Bank defines “middle-income” countries as having per capita GDP of US$1,200 to US$12,000. By this definition, China is at the upper range.

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