Number 4, With a Bullet:
“Revised” economic report will reveal the Chinese are “healthy” consumers, after all.
If there is one thing Beijing and Washington have agreed upon during the past year, it is the need to “rebalance” China’s economy in favor of greater domestic consumption at the expense of “excessive” foreign investment. China worries about a new currency crisis while the U.S. laments its growing trade deficit.
A new economic census will probably be good news in both capitals, though for Washington it may turn out to be a case of being too careless what you wish for.
The upward revision of China’s gross domestic product — perhaps by as much as 22 per cent — “enlarges” this Asian economy by roughly the size of Turkey and puts China squarely at number four among the world’s largest economies. The new census, carried out by many millions of data collectors spread out over the entire country and recording economic activity usually missed by conventional methods, is expected to be released by the National Bureau of Statistics early next week.
A striking feature of the new figures is how badly the service sector has been undervalued in past economic surveys. Too, they may put paid to the shibboleth of China’s “overinvestment economy” (under the old figures, investment accounted for more than half of China’s annual GDP growth) and provide a measure of re-assurance to China’s central bank, the scene of much nail-biting during the various currency crises of the 1990s. Stronger domestic demand means an economy less susceptible to the winds of overseas investment. And China still has very high investment and savings rates (China’s savings rate is close to 50% of GDP), probably high enough to weather all but the most catastrophic overseas economic crisis.
So, what is the bad news? Given that small-scale services are much less labor (as well as capital) intensive than other segments of the economy, this may bode ill for employment growth in some regions. This, in turn, could have an ill effect on now-healthy growth rates in domestic consumption.
But the big news remains the startling development that the Chinese economy is larger — much larger — than practically anyone, especially the Americans, had figured. Already there is talk in the European capitals of a China overtaking the West in economic clout within 15 years. And, given the exponential growth in Chinese “soft power” throughout the developing world and its nascent alliances, particularly with Russia, it may be deja vu all over again — a truly bipolar world.
