China is the world’s second largest economy behind the USA. Its GDP is estimated at $11.9 trillion. The population of China is roughly 1.38 billion. The official unemployment level is 4% and only 3% of the population are considered to live in poverty (meaning they survive on less than $400 a year). Inflation is running at 2% and the central bank interest rate stands at 2.25% and average wages stand slightly below $10800 (cf US wages of approximately $50000).
Official Chinese data suggests that the economy grew at a staggering rate (by comparison with G7 economies) of 6.8% in Q1. The figure beats projections of 6.5% and was supposedly buoyed by strong consumer demand. China has wanted to boost domestic demand for some years to reduce the economy’s reliance on exports. The rest of the world’s major economies are keen to increase their export to Chinese consumers, of course.
It must be said that there is a degree of scepticism with regard to official Chinese economic statistics as growth invariably comes out close to or above official targets.
Chinese authorities are juggling the balls of economic growth, rising public debt and a housing bubble. The quandary is how to maintain growth whilst curbing debt and preventing the housing bubble from inflating further or suddenly bursting.
The obvious elephant in the room with respect to Chinese growth prospects going forward is the looming trade war with the USA. Already, tariffs and counter-tariffs have been levied on targeted sectors of the US and Chinese economies. The received wisdom from the WTO, IMF and economist commentators is that the trade war is not in the interest of either party and could embroil third parties to the detriment of global trade. However, a Bullish US president claims to be convinced that a trade war would be hugely beneficial to US interests and easily won.