China's economic evolution in the year of the dog
As we approach the Chinese New Year, China’s economic focus has shifted – but what is that likely to mean in terms of policy in 2018?
China’s economy has expanded at a staggering pace for the last three decades.
But for the last six years, China has pursued a new model of economic growth, with varied success. Last year saw all three key monthly economic indicators — industrial production, fixed asset investment (FAI) and retail sales — fall significantly; a fact that sparked speculation about the country’s economic footing.
So, is China’s new economic focus working? And where will it go from here?
The new blueprint, formulated by China’s top leadership, has heralded several major shifts: moving away from a reliance on investment, towards consumption; manufacturing and heavy industry towards services; export reliance towards a greater role for domestic demand; rising inequality towards greater equity; and intensive pressure on natural systems towards environmental sustainability. There has also been a shift toward deeper integration with global markets, especially with respect to outbound Chinese investment, China’s role in frontier technology markets, and knowledge and innovation.
But progress towards these goals in economic development has in recent years been modest in terms of rebalancing towards household consumption and away from fixed capital investment. The tertiary sector has, however, continued to grow more rapidly than other sectors, accounting for 52 per cent of GDP in 2016.