CEIC China Data Talk: What Should the Determinants of Economic Growth Be?

China Gross Capital Formation Contribution to GDP Growth Chart
China Gross Capital Formation Contribution to GDP Growth Chart

CEIC China Data Talk - August 25, 2016 China Premium Database + National Account + Gross Domestic Product + Gross Domestic Product: Index Will China continue to experience an economic slowdown in the second half of the year? This thought has once again caused concern among industry professionals about the contributing factors to GDP growth. At present, the figures suggest that we cannot be optimistic about the situation as sustainable growth elements are not yet strong enough. Recently, the National Bureau of Statistics reclassified research and development expenditure as fixed capital formation, and revised GDP data in accordance with the new calculation method. Tracing back historical figures over the past 10 years, the revised annual GDP growth rate increased by 0.057 percentage points on average. Although the impact on the historical growth rate was only marginal, the ground gained by R&D will have a profound impact on GDP figures in the future. Under the new method, the importance of the final consumption’s contribution to GDP growth has diminished while gross capital formation now plays a bigger part. In 2015, the contribution of final consumption to GDP growth was revised downwards from 4.2% to 4.1%. This number has been dropping for the past 10 years. In the first half of the year, final consumption contributed 4.92% which was lower than the 5.67% in the first quarter. Additionally, the fixed asset investments are also losing their momentum in the first half of the year while the final consumption still remains strong. Is the larger share of final consumption in GDP growth a result of the weak investment? Since 2006, the role of exports in boosting China’s economic growth has become less influential as shown by the downward trend in GDP growth contribution. Simultaneously, consumption growth is also slowing down. The drivers of economic growth and their focus should be on whether or not such growth can improve the quality of people’s lives. People generally are less sensitive to economic growth that is promoted by fixed asset investment. Contributed by the China Database Team Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog

24th August 2016 CEIC China Data Talk: What Should the Determinants of Economic Growth Be?

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