China – from an insider’s view

As always most of the talk remains about China and the most asked question is China’s economy is slowing too fast?

David Thomas, a man who has been visiting and dealing with China for over 20 years, recently visited China and gives some very relevant views.

In essence David supports the view that while China’s amazing growth is certainly slowly
a) it is not stopping &
b) The Chinese know what they are doing (well mostly)

The key points from the attached article include:

  1. China’s economy is slowing. This is deliberate & controlled
    • China’s GDP growth is slowing and probably sits 5% to 6.5% range.
    • China doesn’t need growth at the moment. Unemployment is steady (around 4% – 5%), domestic consumption is picking up slowly If China wanted growth, they could easily provide some kind of stimulus which would provide short term gain (but long term pain!)
    • What China needs is better governance, market reform, increased transparency and the elimination of corruption. The Central Government, and President Xi in particular, is very committed to achieving all of these things and this will slow things down a bit BUT this will be very good over the longer term.

Ron’s Note:  A Chinese friend recently visited China and told me the corruption crackdown is massive and really scaring local officials and public servants. Remember under the Chinese system corrupt officials can be tried, convicted, appealed and “shot” in weeks / months not years!

  1. There’s no sign of weakness on the ground
    • I visited a plastics manufacturing factory in Quanzhou …  slowing in some areas but their business was strong and stable. No slowdown there.
      • Tourism is a fast growing industry. Over 100 million Chinese people travelled overseas in the past 12 months and domestic market is booming.
      • Household spending figures (excluding Government officials and SOEs) are strong  You can’t seem to get into a restaurant without booking, there are queues outside the luxury brand stores and you can’t move in shopping malls    at the weekends.
    • Property prices are rising again, notably in the first and second tier cities, and inventories in the third and fourth tier cities are starting to reduce.
  1. The share market will recover
    • China’s key economic fundamentals are still in place:
      • economic reforms
      • corporate restructuring
      • lower interest rates
      • deregulation
      • modernising the economy (not ‘westernising’)

So there you go, Ron’s glass is still half full!

Cheers,

Ron Ogilvie

Link to full article – China Modernising NOT Westernising

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