China's new normal
- By Dan Steinbock
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E-mail China.org.cn, October 1, 2014
Structural rebalancing in the long-term
In structural terms, the "new normal" reflects positive long-term trends. After all, recent economic reports suggest that the Chinese economy is finally undergoing true rebalancing. Most obviously, growth rates have decelerated from over 10 percent to around 7.5 percent today.
For three decades, China's growth was fueled by investment and net exports. Today, export growth has slowed from its pre-crisis average of 29 percent to less than 10 percent. As the role of net exports has declined, manufacturing employment and output have shrunk from the pre-crisis peak of over 10 percent to just 2 percent, as a share of GDP.
While growth levels are decelerating in the first-tier coastal megacities, they remain relatively high in the inland provinces. The mainland's income distribution and regional balance are slowly improving.
Overall, these developments reflect slower global demand in the aftermath of the global crisis, which has intensified efforts in the mainland to reduce the role of foreign demand as a critical growth engine.
On the other hand, these trends also reflect the eclipse of China's demographic transition. As the share of working-age people in the total population has declined since 2010, the growth potential of the economy has begun to decelerate as well.
Both trends are reflected in China's urbanization, the pace of which is slowing. With the urban population accounting for 53 percent of the total population, China is today where America was in the early 1920s. Urbanization continues to hold significant economic potential, as long as it spreads to the mainland's inland provinces and medium-size cities.
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