News / Economy

    China Loses ‘World Factory’ Image as Industry Slides

    A Chinese national flag flies at the headquarters of the People's Bank of China, the country's central bank, in Beijing, Jan. 19, 2016.
    A Chinese national flag flies at the headquarters of the People's Bank of China, the country's central bank, in Beijing, Jan. 19, 2016.

    China's economy grew 6.9 percent in 2015, the slowest full-year growth for the Asian economic powerhouse in 25 years. Data released Tuesday also suggest the country is shedding its image as the "world's factory," and highlight the growing importance of the service sector.

    China’s auditors said the service sector has replaced manufacturing as the most important contributor to the economy. The service industry contributed more than 50 percent of the GDP in 2015, Wang Baoan, head of the National Statistics Bureau, said while releasing the annual growth report.

    The manufacturing sector, which has been the bulwark for China’s “economic miracle”, fell dramatically by 2.4 percent to 7 percent in 2015 as compared to the previous year.

    FILE - Employees work on a FiberHome Technologies Group factory production line in Wuhan, Hubei province, China, July 27, 2015.
    FILE - Employees work on a FiberHome Technologies Group factory production line in Wuhan, Hubei province, China, July 27, 2015.

    Service sector doing well

    Chinese Premier Li Keqiang has emphasized the growth in domestic consumption and the service sector to offset the decline in manufacturing and exports. The service sector has grown significantly, emerging as a major job creator.

    But analysts said the service sector, which is based on domestic consumption, cannot be relied on for long-term growth. No country can grow on the strength of consumption if its productivity is sliding, they said.

    "By itself, consumption growth will not drive the long-term growth of Chinese economy," said Xu Bin, professor of economics and finance at the China Europe International Business School in Shanghai.

    “Long term growth is only possible with higher productivity.  It’s only in the short term that consumption growth can be useful,” Xu said.

    Lowered industrial growth statistics suggested that many more factories, or departments within them, were closing across China than what has been reported publicly, analysts said. 

    Sectors like mining and electricity generation, which employ over 30 million people, are also experiencing a major slowdown.

    FILE - Miners wait in lines to shower during a break near a coal mine in Heshun county, Shanxi province, Dec. 5, 2014.
    FILE - Miners wait in lines to shower during a break near a coal mine in Heshun county, Shanxi province, Dec. 5, 2014.

    Slower economic growth in many areas

    Mining output slipped to a mere 2.7 percent last year from 4.5 percent in 2014. The growth in electricity consumption, a crucial aspect of industrial output, decelerated to 1.4 percent compared to 3.2 percent in 2014.

    Middle-class Chinese are spending hugely on education, health and tourism, Xu said. These segments of the service industry have been supported by the high-paced growth in online shopping and online banking activities.
     
    "E-commerce is the biggest economic driver in China today. It has emerged as the center of convergence of all kinds of services, and the biggest job creator," said Ernie Diaz, consultant with China Digital Review. "Online shopping has made it possible to get almost anything in second- and third-tier cities, and helping their growth."

    China reacts to slowing of growth
     
    Chinese President Xi Jinping tried to soften the bad news, saying the economy has entered a new stage of slower, but more resilient growth. He asked officials to make innovation the pivot of economic development besides encouraging domestic consumption and service sector growth, the official Xinhua news agency reported.

    Stock indexes in Shanghai, Hong Kong surge

    The year-end figures for the world's second biggest economy only just missed policymakers' target of around 7 percent full-year growth for 2015, a fact that may ease investors' concerns as Beijing struggles to move from an investment- and export-driven economy to one driven by consumer demand.

    Stock indexes in Shanghai and Hong Kong surged on the news, rebuffing some investors' fears that China's growth would be even slower.

    Despite China's slowing economic fortunes, Beijing's advance is still sharply higher than in Western economies.

    The United States, the world's largest economy, recorded 2 percent growth in the July-to-September period last year, while Europe's 19-nation bloc that uses the euro currency advanced just three-tenths of a percent in the same quarter.

     

     

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    Comment Sorting
    Comments
         
    by: Hffyd
    January 20, 2016 5:12 AM
    Biased shit.
    The gdp data from the usa is inflated.

    by: Marcus Aurelius II from: NJ USA
    January 19, 2016 12:07 PM
    Is the world waking up to the fact that China does it all with smoke and on a rare clear day when you can see them, mirrors? China is no economic powerhouse, it's a filthy grimy cheap industrial workhouse, the 20th century equivalent of a rust belt. Everything about it is fake. It doesn't have a ten trillion dollar GDP economy, it's more like 3.5 trillion when you take the fiction of PPP out. And when you look at GNI and GNI per capita it's even lower. It has invented nothing of note since noodles and gunpowder.

    What money they did earn was largely wasted on building a useless façade that has put them 28 trillion dollars in debt while warehouses all over the world drown in cheap electronics and textiles. China has more problems than you can list but among the most worrisome for it should be that it is rapidly running out of potable water. Its environment is headed for "uninhabitable." That's the price it paid for wooing American factories and jobs away from the US. Where are you going next American industry when all of your employees in China are no longer healthy enough to work anymore?

    by: Wangchuk from: NYC
    January 19, 2016 9:37 AM
    The GDP data from China is routinely inflated. Most int'l economists believe Chinese national economic figures are inaccurate & cite numerous flaws w/ their methodology. So if the Chinese Govt is saying that the economy slowed, then you know the economy slowed worse than they will officially admit.
    In Response

    by: Anonymous
    January 20, 2016 5:13 AM
    The GDP data from the usa is totally inflated.

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