Home Blogs Asian Chemical Connections China GDP Growth 4-5% in 2013-2020

China GDP Growth 4-5% in 2013-2020

Business, China, Company Strategy, Economics, Europe, US
By John Richardson on 17-Oct-2012


Canton Trade Fair. Source of picture: http://www.vatti-china.com/News/83.htm


By John Richardson

IT would be nice to believe that the improved mood at this week’s Canton Trade Fair represents a long-term turnaround in China’s economic direction.

This reflects a 9.9% increase in overall exports in September, much higher than the 5.5% median estimate in a Bloomberg Survey.

But as Bloomberg writes: “In the first nine months, the (China-US trade) surplus widened about 38%t from a year earlier to $148.3 billion, customs data show. That may provide ammunition to Republican presidential candidate Mitt Romney, who pledges to designate the nation a currency manipulator if elected, a step the US government hasn’t taken since 1994.”

Ideal election fodder, obviously, but Romney or Obama will face a far bigger problem once in office: The US fiscal cliff. This is likely to end the recovery in China’s exports to the States.

Further, exports to the European Union fell by 10.7% in September. The Eurozone crisis is going to take a long time to resolve.

Attendees at the trade fair also commented on how domestic demand remains weak.

This reflects deep structural changes in China’s economy, and the hangover from the investment-led growth model, that will lead to several years of much-lower GDP (gross domestic product) growth.

An excellent September report from the UK-based consultancy, Simon Hunt Strategic Services, concurs with our view, and says on the GDP outlook:

“Officially reported GDP will probably come in at 7.8-8.0% this year. However, we focus on nominal growth and discount that number by an estimated GDP deflator.

“We are confident in our historical data for the deflator but have to estimate the quarter on quarter numbers for this year. Last year, the GDP deflator was 7.6%. We guess that it is now running at between 5.0- 5.5% but likely to increase in the fourth quarter.

“Our forecast for real GDP growth this year is between 5.2-5.7%.”

Real GDP growth will range between 4-5% in 2013-2020, adds the consultancy.

“This is a humongous change for the new leadership to manage and will lead to intense debates and internal fights with vested interests and with local governments,” continues the report.

“Global business models of multinationals are going to have to be changed and changed sharply. Some are already doing this looking to relocate capacity out of China and back into the US.”