June 19 ,2014 | by Hari Sri

China growth slowdown is a sign of consolidation, not decline, says report

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ICAEW has published a new report which shows that slowing economic growth in China represents a period of consolidation.

Growth in China may be slowing down but it is “not something we should be too worried about”, according to a new report from the Institute of Chartered Accountants of England and Wales (ICAEW).

Economic Insights: Greater China was produced for the organisation by the Centre for Economics and Business Research (CEBR), and finds that this year could be the first in which China officially misses its headline economic growth target. However, the gap will still be fairly small.

 

CEBR is predicting expansion of 7.3 per cent, just short of Beijing’s 7.5 per cent target.

But ICAEW says that this does not necessarily mean that the country is facing a major crisis – in fact, ICAEW economic adviser and CEBR executive chairman Doug McWilliams says that “the chances of a hard landing are very low”.

He adds that after such a period of expansion with a booming manufacturing industry, China was always going to face a more difficult task in consolidating that growth. However, it is still likely to improve on its place as the world’s second-largest economy in the coming decade and a half.

“China has picked all the low hanging fruits so progress from now will inevitably be harder,” he explains. “However in the next 15 years, we expect China to top the world economic league.”

 

The report argues that China has been able to take advantage of an influx of investment since it began to open up its markets, while Special Administrative Regions Hong Kong and Macau have enjoyed the benefits of being treated as gateways to the mainland.

It has already begun to develop beyond its labour-intensive manufacturing industries into more high-skilled and high-tech products. Yet now the country needs to position itself to sustain and grow this industry, developing more businesses that can make and use components for high-tech industries, it says. To do that, investing in education and cultivating the IT skills of the workforce will be crucial tactics.

Hari Sri

Hari is the LSBF Blog's News Editor. He manages the editorial content on the blog and writes about current affairs, SME, entrepreneurship, energy, education and emerging market news.

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