It’s no surprise for anyone that the economic growth in China makes the country to become the world’s largest economy according to the IMF (International Monetary Fund) in September 2014 measured in purchasing power. That moves the country into the ranks of middle income countries and will have a profound effect worldwide.
But recently since last year, China’s economy grew at its slowest pace in 24 years as property prices dropped, companies and local governments struggled under heavy debt burdens, keeping pressure on central government to take serious steps to avoid a sharper downturn according to Reuters.
After roughly 30 years of GDP growth by 10%, now China’s GDP grew by 6.9% and the added-value industrial output grew by 6.2% in November 2015. China’s Foreign Direct Investment increased by 7.9 percent to USD 114.04 billion in the first eleven months of the year.
Exports from China declined by 6.8 percent to USD197.24 billion in November of 2015, the fifth straight month of fall, while imports to China dropped 8.7 percent to USD143.14 billion, following a 18.8 percent decline in October. It is the 13th straight month of decline, as a result of declining commodity prices and weak demand. Exports and Imports in China is reported by the General Administration of Customs.
How will the slower growth of China’s economy influence the European market and especially the Swedish companies’ investment in China?
This question is relevant for many Swedish organisations who are interested in the Chinese market. Recently I held a lecture for a Swedish bank in Skövde, the topic of the lecture was about the Chinese current economic situation and its impact for the Swedish companies and organizations who are going to trade or invest in China.
“The country’s period of miraculous break-neck growth is over, but let’s get over it,” said a commentary on the official Xinhua news service, referring to a long string of double-digit expansion.
China’s economic reforms must be implemented even if it becomes painful, stated Premier Minister Li Keqiang after the People’s Congress meeting in March. At the same time, it seems a new wave of cutbacks in state-owned enterprises will be on the way. Swedish companies have increased their use of RMB in their business with China in the last two years. Globally, the Chinese currency, standing before a breakthrough this year, according to the experts from Commercial Bank. Major changes in the regulatory framework is underway for foreign investment in China. It will be easier to establish companies in non-sensitive sectors of the economy while the control tightened in sectors such as telecommunications, energy and agriculture. The example of the free trade zone in Shanghai spread. Three new free trade zones should be set up in Guangdong, Fujian and Tianjin. It could increase with time. Most northern European and German companies expect higher sales in China this year, according to SEB’s latest survey.
China’s economic growth will probably continue for some time and, if it does, it is going to have a profound impact on the world’s economy.