China: an economy that’s still on track

James Laurenceson, Deputy Director, Australia-China Relations Institute, University of Technology Sydney

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1. On the demand side of China’s economy, fixed asset investment continues to slow but consumption remains robust. 

• Retail sales grew at 10.6 percent (year-to-date) in November.[1]
• On-line sales grew 34.5 percent (ytd) in November.[2]
• Express parcel deliveries were up 48.1 percent (ytd) in November.[3]
• Air passenger traffic was up 11.2 percent (ytd) in November.[4]

2. The Westpac-MNI China Consumer Confidence Index was up in December compared with November and is higher than one year ago.[5] 

3. On the supply side of China’s economy, the manufacturing sector continues to slow but the services sector is proving resilient. Over the past four quarters China’s services sector has grown by 11.9 percent.[6]

4. The Caixin Services Purchasing Manager Index was down in December compared with November but still stood at 50.2 in December.[7] A reading above 50 indicates an expansion compared with the previous month.

5. In November China’s Premier, Li Keqiang, said that he expected growth to be “at least 6.5 percent” through to 2020.[8]

6. The latest forecasts from the IMF are that China will average 6.3 percent growth over 2015-2020.[9] Here’s what the IMF’s forecasts look like in terms of RMB being added to the economy each year (graph depicted in PDF available for download on this page). In 2020, China’s economy is expected to add 25 percent more purchasing power than this year.[10]   

7. The IMF expects that the purchasing power that will be added to China’s economy in 2020 will be 2.2 times,[11] 26.5 times[12] and 4.7 times[13] that of the US, Japan and India, respectively.[14] 

Author

Professor James Laurenceson, Deputy Director, Australia-China Relations Institute, University of Technology Sydney