Q4/2017: Manufacturing and exports give growth extra boost
China’s leadership has committed itself to a shift to “quality growth”, economic transformation and industrial upgrading. Some credible reforms to address structural problems in the economy were introduced last year but the political focus was mainly on advancing Chinese state capitalism. In the latest edition of their quarterly economic analysis Max J. Zenglein and Maximilian Kärnfelt argue that measures such as a push to reach ambitious industrial targets outlined in the Made in China 2025 plan have expanded the role of the state in the economy rather than reduced it. They conclude that a true shift in Chinese economic policy is not going to happen any time soon.
In 2018, progress in tackling excessive credit growth and low profitability could stall due to slower growth prospects. This could lead to a return to old economic policies of propping up key industries through state intervention. Just as China attempts to reduce overcapacities in traditional industries, it is beginning to build new overcapacities in other areas, namely in the technology sector. Zenglein and Kärnfelt also note that in 2017 old growth drivers like manufacturing and exports accelerated GDP growth for the first time since 2010.
The MERICS Economic Indicators are published on a quarterly basis and trace the multiple data sets that shape China’s development in key areas, among them growth figures, investment flows, industrial output, financial markets and consumer sentiment. The indicators are mostly based on data from China’s National Bureau of Statistics (NBS), but macroeconomic indicators cannot tell the whole story. A closer review of these data often reveals hidden developments and trends.